The government-elect must make all deals under China Pakistan Economic Corridor public and all domestic stakeholders - civil government and defence - must voluntarily slash their expenditure with the objective of meeting the unsustainable budget deficit.
This was stated by Former Finance Minister Dr Hafeez Pasha while speaking at Aaj TV programme 'Paisa Bolta Hai' with Anjum Ibrahim. He warned that the situation on the external and domestic front is deteriorating every day and unless mitigating measures are put in place the situation would further deteriorate.
Pasha noted that defence expenditure increased enormously during the last five years due to the national action plan and Zarb-e-Azb/Raddul Fasad operations necessary because the country was facing severe security challenges but now the situation has improved.
Civil administration allocations increased by 60 percent during the last five years on account of annual increase in salary bill as well as the rising cost of borrowing (due to a massive rise in debt - domestic and external) during the past five years which is simply unsustainable, he pointed out.
Hafeez Pasha noted that the government-elect will inherit $27 billion financing gap - three times higher than what the PML-N inherited in 2013 of $9 billion. Current account deficit is $18 billion today while in June 2013 it was $ 3.5 billion. And loan repayments of $9 to $10 billion per year today.
Pasha said that priority of the new government must be to preserve balance of payment transactions and this would require: (i) increasing exports; (ii) reducing imports; and (iii) seek support from the International Monetary Fund (IMF) as well as explore other sources including China.
Former Finance Minister termed the US Secretary of State Mike Pompeo's warning that IMF will not provide Pakistan a bailout programme for repayment of loans to China as 'inappropriate'.
"If the country does have sufficient money to repay IMF's previous loan as is the case with Pakistan, then first priority is to IMF," he explained.
He said that as the IMF will be unable to help Pakistan meets its $27 billion financing gap, Pakistan not only needs IMF's support, but has to seek support from other sources, especially from China who has been providing support to Pakistan during the last five years. China provided $ 4.5 billion to Pakistan in the last year, added Pasha.
Hafeez Pasha contended that last year's financing gap of $24 billion eroded $6 billion foreign exchange reserves. He said as a consequence $9 billion foreign exchange reserves were left in the country - barely sufficient to cover two months of imports.
Hafeez Pasha said that the new government will inherit a historically high budget deficit of Rs 2400 billion, over 7 percent of GDP against the target of Rs 1500 billion. He said this implies an increase in expenditure and a shortfall in revenue.
He said that budget deficit target for the incoming government was set to decline to 5 percent from over 7 in the current fiscal year. IMF will seek to reduce the budget deficit target to 4.5 percent which will suffocate the country. There is need for an in-depth analysis of expenditure side and the time has come for two to three major recipients of the budget to make sacrifices.
Former finance minister also stressed the need for transparency in the terms and conditions for projects agreed under the umbrella of the China Pakistan Economic Corridor (CPEC).
He said a long-term plan was signed by China and Pakistan and for the transparency the projects and use of money must be presented to parliament. Pasha expressed the hope that the new government would ensure transparency in CPEC projects.
He said that issue of transparency is not in the terms of loans but in their use as there was a policy that only Chinese companies can bid and consequently the cost of projects may have increased. He, however, stated that CPEC is very important for Pakistan. Repatriation of money to China was very little and profit was very small, he added.
He urged the government elect to grant autonomy to the Pakistan Bureau of Statistic (PBS) as previous finance ministers had engage din massive data manipulation.