Lack of funds for development projects: Fiscal deficit blamed

Advisor to Prime Minister on Finance Dr Abdul Hafeez Shaikh has blamed fiscal deficit for preventing the government from making funds available for development sector. Speaking at the inaugural session of the two-day conference titled 'Rethinking Microfinance: Developing a New Inclusive Finance Compass,' he said the government has been borrowing from commercial banks to bridge the fiscal deficit.

Shaikh said that some of the challenges where the government has not been able to do well were are low saving of around 10 percent and investment of around 15 percent while other regional countries have over 30 percent. Another area, he said, was documentation of the economy and microfinance with its outreach could play a role in documenting economy.

The advisor added that this combination of microfinance along with the combination of tackling the issues of low saving and low investment as well as financial inclusion and documentation of economy is a good instrument for uplifting the people from the poverty trap.

The adviser added that after 15 months' efforts, there are signs of economic improvement with economic environment becoming more stable and this is also being acknowledged by the international community and global economic institutions and this was also reflected in the form of over US$ 1 billion investment in Pakistan's bond market as well as 238 percent growth in the foreign direct investment in the first four months of this fiscal year which comes to $650 million.

The adviser said that participants of the conference should deliberate on how the cost of doing business could be reduced in terms of reduced rate of interest and process time, and how it could help in terms of job creation and tackling poverty.

"We also need to debate how we can keep learning as these are important questions that need to be debated and answered to formulate strategies for furthering growth in this sector," he said.

The adviser said that the present government inherited a grim economic situation with high debt levels and the highest fiscal and current account deficits but after tough decisions and in collaboration with international community, stability has been achieved. He said that international community is also recognizing the government's efforts and IMF which recently concluded its first review noted that Pakistan met all agreed structural benchmarks with comfortable margins in the first quarter. Additionally, he stated that Bloomberg declaring Pakistan Stock Exchange as the world's best performing market in last three months and now Moody's upgrading Pakistan's ranking from the negative to stable are positive developments.

The government inherited the highest ever current account deficit of $ 20 billion but this massive current account deficit was contained and turned into a surplus for the first time in many years in the month of October. Similarly, the fiscal deficit was adjusted for interest payment, which is also called primary balance, and has also turned into a surplus in the first quarter of this year. He added that the government's efforts have been to increase exports which had previously shown negative growth for five consecutive years, but because of incentives given to exporters in terms of no taxes on export sector as well as subsidization of gas and electricity tariffs and grant of additional Rs 300 billion subsidized loans, exports had gone up during the first four months of current fiscal year.

The government is working on a strategy to lead a transition away from a largely import-oriented economy to the one where the focus is on exports and earning of dollars will improve the quality of life of the common Pakistanis, he said.

According to a Finance Ministry statement, Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh also held a detailed interaction with a group of television anchorpersons in his office. During an informal discussion that continued for about two hours, the adviser briefed the anchorpersons on the current state of economy with a focus on what state of economy the government inherited in 2018 and what policy steps and measures were adopted by the government towards achieving economic stability and subsequent success achieved in various areas, including 16.4 per cent revenue growth, 238 per cent growth in FDI, 3.4 per cent growth in exports in the first four months of this fiscal year as well as stabilization of exchange rate, declaration of Pakistan Stock Exchange as world's best performing stock by Bloomberg and the up-gradation of economic outlook of Pakistan from the negative to stable by the Moody's.