The adviser on finance said that the International Monetary Fund (IMF) has softened its stance on sovereign guarantees and allowed government for taking a Rs 250 billion loan and making payment to the electricity producers on account of circular debt. There was a restriction on Pakistan for issuance of sovereign guarantees over Rs 1.6 trillion and the IMF has relaxed this condition, added the adviser.
He said that after four months stabilization, the economy is set on track for improvement and the government's priority is now to move the economy on fast track for employment generation. He was confident that growth target set for the current fiscal year would be surpassed comfortably. "We will achieve GDP growth more than set target," the advisor said, adding that after achieving stability, the government wants to pay its full attention to Naya Pakistan Housing Scheme, exports and circular debt. He said that real change in the economy would bring about when the country's capacity to earn dollars would increase.
Shaikh said that Rs 300 billion additional, with Rs 200 billion from banks and Rs 100 billion from the State Bank of Pakistan, would be given to exporters and government would bear the cost of loans debt servicing to make the country's exports competitive and earn more revenue.
Hafeez Shaikh said that the government has also decided to cancel Rs 30 billion Sales Tax Refund Bond and payment of Rs 30 billion would be made to exporters in cash.
Replying to a question, he said that NFC payments are being made; however, discussions with provinces are in progress to decide how to make adjustment in NFC after the merger of erstwhile FATA into Khyber Pakhtunkhwa. He said that the present government has allocated Rs 152 billion for FATA and this has been the highest-ever allocation in the history of the country.
He said that talks with the IMF are a continuous process and so far the Fund is satisfied on the four-month performance of the government that led to a reduction in current account deficit and fiscal deficit, and increase in exports and foreign exchange reserves by $1.2 billion from July 2019 onward.
The advisor on finance said that there is no direct link of FATF with the IMF and hurriedly added that combating terror financing and money laundering is in Pakistan's own interest. To a question about increase in prices of essential commodities, he said the government has released wheat in the market to address its shortage and provided Rs 30 billion to the Utility Stores Corporation (USC) to provide relief on prices to the poorest, besides reducing its own expenditure.
"The Prime Minister has been most sensitive to the price increase because his and no one else's political capital would erode if the prices of essential commodities go up" was the response of advisor on finance but he was completely oblivious about the price of tomato in the market and stated it was being sold in wholesale market at Rs 17 per kg. However, the market price of tomato is hovering over Rs 200 per kg in twin cities of Islamabad and Rawalpindi while it is much higher in Karachi.
The advisor said that discount rate is decided by the monetary policy committee and the present government must be given credit for giving independence to the institutions. The advisor said that IMF has appreciated reforms in the power sector, Federal Board of Revenue and central bank. Shaikh said that government reached a deal with traders and gave them some relaxations but it did not compromise on CNIC (computerized national identity card) condition.
The advisor said that exports of the country increased by 4 percent, and FBR tax collection increased by 16 percent and domestic tax collection grew by 21 percent during the first four months. He also claimed that there was 45 percent increase in cement production which reflects increase in the construction activities whereas stock market has also been on the rise since July 2019. The adviser also claimed, "We have also repaid $2.1 billion foreign debt of last government."