Dar rejects speculations about understanding with IMF on rupee devaluation

Minister for Finance Senator Mohammad Ishaq Dar has rejected speculations about the understanding between the government and the International Monetary Fund (IMF) on devaluation of rupee.  While addressing a launching ceremony of Institute of Public Policy (IPP) of Beaconhouse National University’s sixth annual report here on Monday he said he was disappointed to come across comments and analysis by certain eminent economic experts that rupee is bound to depreciate to the extent of Rs 114.00 as a result of some implicit understanding between Government of Pakistan and International Monetary Fund. “I would urge refrain from issuing such speculative statements which neither serve any purpose nor are in national interest”, he added.  The Minister said that the government successfully finalised, without compromising an inch on national interest, a programme for $ 6.64 billion with the IMF on the basis of home grown reform agenda as enshrined in PML-N’s manifesto launched publically before contesting General Elections 2013. He said that not only has this programme stabilised the external account, but it has also re-established the confidence of other international donor agencies and international banks for development partnerships with Pakistan as an IMF member state. “International Financial Institutions and Banks, which were hitherto hesitant to do business with Pakistan, have responded positively and are now  approaching the Government of Pakistan for doing business which had halted for the last 3 years”, the Minister said adding the Islamic Development Bank has already agreed to a loan of 750 million Euros and a trade facility of 150 million dollars. He said that Pakistan had to enter into the programme with IMF at a time when it was going through one of the most difficult economic phases in  its history. Left with hardly a choice we had to approach IMF to beef up our  dwindling Foreign Exchange Reserves as well as fulfil national obligations. Finance Minister Ishaq Dar said that the ideas on Pakistan’s economy, its core problems, and the solutions to these problems presented in the report “The State of the Economy: From Survival to Revival” are broadly in conformity with what the government has in its plan.  The report, he said  identifies the energy crises, burgeoning debt problem, fiscal imprudence of the past years, macroeconomic imbalances caused by poor resource mobilisation, external account weaknesses, falling investment, the financial burden of state owned enterprises and misgovernance as the root cause of the economic woes.  He said that all was indeed very true and that was why he had often lamented on those issues in the past at different forums, including in his speeches in the Parliament on previous budgets for the last few years.   “Regrettably, the average annual growth rate over the past five years has been a dismal low of just about three percent, when our neighbours were growing at rates of over seven percent and investment to GDP has fallen from 19.3 percent in the recent past to a record low of 12.6 percent in FY 2012-13”, he remarked.   He said similarly, public debt, which stood at Rs 3 trillion in June 1999 and Rs 6 trillion in March 2008, had expanded to over Rs 14 trillion in June 2013.  Even after the payment of a Tariff  Differential Subsidy of Rs 1.5 trillion during these years, the government found a legacy of unpaid subsidy of Rs 503 billion, commonly known as Circular Debt,” he said. The revised federal fiscal deficit for fiscal year 2012-13 was projected at 8.8 per cent and with some expenditure cuts and other measures closed at an unacceptable level of 8.2 per cent of the GDP, while the current account deficit was $2.3 billion, he said.  The Sixth Report of the IPP presents some very persuasive answers to these problems and readers of this report would certainly be happy to know that the policies implemented and being adopted by the Government had much in common with the solutions that have been proposed in the report, he added. “We have formulated a Medium Term Budgetary Framework for 2013-16 to put the economy on a trajectory of sustained growth”, he said. He said under this framework, the government’s goals by Fiscal Year 2016 include GDP growth to gradually rise to around 7 percent Investment/GDP to rise to 20 percent, fiscal deficit to be brought down to 4 percent of GDP, Pakistan’s foreign exchange reserves be increased to around $20 billion, and public debt be reduced to 57.5 percent of the GDP. Reduced domestic borrowing, reduced debt-to-GDP ratio, zero borrowing from the State Bank of Pakistan and enhanced development spending in current expenditures are also a part of the Government’s  policy to achieve macroeconomic stability, he added.   The minister said that the government had  introduced deep reforms in the power sector and taken bold steps including  clearance of Rs 480 billion circular debt, while the remaining Rs 23 billion was subjected to pending litigation on account of liquidated damages. As a result of that, 1700 MW power had been added to the system. Adding to the power generating capacity available in the country at an accelerated pace. For instance reactivation of the Nandipur Power Project which would add 425 MW to the national grid (525 MW if operated on gas), financial close on two civil nuclear  two power generation projects in Karachi, with a capacity of  2117 MW, accelerated work on Neelum-Jhelum Hydro Project with  969 MW generation capacity, work on Dasu Hydropower Project and Diamir-Bhasha Dam have been  initiated simultaneously.   Ishaq Dar said that the government is also reforming governance of the power sector including,  re-composition of the boards of DISCOs in a very transparent manner and addressing the problem of power theft and line losses that threaten re-emergence of the circular debt.  The Economic Corridor, he said is amongst one of the most important initiatives of the government to build a high quality modern expressway linking Gwadar with Kashgar as a modern equivalent of ancient silk-route. The Economic Corridor will open up countless economic opportunities for Pakistan from China to Central Asia.  In addition, an MoU with the Afghan Government has been signed to connect Pakistan with Afghanistan with a reliable rail and road network, he added. “We are implementing effective Tax Reforms to mobilise resources including cleaning up the tax administration to improve governance, rationalising tax rates and the burden of taxation, broadening the tax base, removing anomalies and distortions, reviewing tax procedures, rationalising tax exemptions, and ensuring strict action against evaders”, the minister added.  In the case of State Owned Enterprises, he said professional managers are being appointed in all public sector corporations through a competitive and transparent process of recruitment.   Ishaq Dar said an independent Federal Commission has been constituted to ensure transparent selection of heads of Autonomous Bodies.