The government has assured International Monetary Fund (IMF) of implementing reforms in power sector, including disbanding of Pakistan Electric Power Company (PEPCO) by October 30, besides the implementation of Reformed General Sales Tax (RGST) by October, 01.
This was stated by Minister for Finance Dr Abdul Hafeez Sheikh and Deputy Chairman Planning Commission Dr Nadeem Ul Haq here on Thursday during a brief talk with media after their meeting with Vice Chancellors of public sector's universities at Higher Education Commission (HEC).
"Insha Allah Reformed GST will be enforced as per announced schedule of October 1, 2010" Hafeez said while denying a statement attributed to him that financial constraints would not allow the federal government to pay salaries to its employees after two months. However, he said that implementation of reformed GST has become more critical after the floods for mobilising resources for reconstruction and rehabilitation of flood victims.
"We need tens of billions of dollars to undertake reconstruction and rehabilitation of millions of people displaced by the worst ever floods in the history of the country," he added. The Minister said that it would take years to complete the challenging task of rehabilitation and reconstruction and the needs of the flood-affected people are more pressing than HEC and universities.
He said that all the available resources would be spent for reconstruction and rebuilding of destroyed houses and to cater to the immediate needs of the affectees with respect to providing temporary shelter, food, health and other needs such as sanitation. The destruction caused by floods is massive inclusive of millions of houses, dams, roads, bridges, highways, gas and power installations. The Minister said that Public Sector Development Programme of the federal government would be reprioritised in consultation with all the stakeholders to create fiscal space for mobilisation of resources to repair the flood damages. Hafeez said that $451 million approved by the IMF would be spent in flood-affected areas.
Deputy Chairman Planning Commission told media after the meeting that the government has guaranteed to the IMF that Reformed GST would be enforced from October 1, 2010 and it would do away with PEPCO and undertake other reforms in power sector by October 30. He said that IMF mission would visit Pakistan or Dubai for fifth review of Pakistan's economic performance whose completion would ensure release of remaining trenches of augmented amount of Stand-By-Arrangement arrangement.
The power sector reforms that had been agreed with IMF are tariff reforms, reduction in power sector line and distribution losses, privatisation of distribution companies as per government's privatisation policy of privatising 26 percent share along with management control and reduction in circular debt in a major way.
He said that a fresh business plan is being finalised for the power sector reforms and it would be implemented in letter and spirit for our own sake as the country cannot afford further budget drain. "These reforms would take a few years to complete and these must start now as we are not in a position to further delay these reforms," he added.
He said that Pakistan has also agreed with International Monetary Fund (IMF) to keep the budget deficit at 4 percent of the Gross Domestic Product (GDP) excluding additional flood expenditures. The estimated impact of floods on budget would be available by October 15 and the government would show additional expenditure impact in the budget deficit and would accordingly inform the IMF authorities during the formal fifth review of Pakistan economic performance, he added.