Borrowing only for development from now on, says Dar

ISLAMABAD: Federal Minister for Finance Ishaq Dar has said that the downward spiral of borrowing for the current expenditure has been brought to an end and now borrowing should be only for development purposes.

Dar shared the good news with the members of the Economic Advisory Council (EAC), saying that after many years, Pakistan is poised to spend more on development than the total fiscal deficit. This is a major milestone, he said, as henceforth the downward spiral of borrowing for current expenditure has been brought to an end. From the current year onward, borrowing should be only and only for development expenditure, the minister remarked.

The eighth meeting of the EAC was held under the convenership of Dr Ishrat Husain, along side Finance Minister Senator Mohammad Ishaq Dar on Saturday. The meeting was attended by members Abid Hasan, Sakib Sherani, Dr Abid Suleri, Arshad Zuberi, Qazi Azmat Isa, Farrakh Qayyum and Farrukh Saleem. Senior officials of all the economic ministries/divisions also attended it.

Highlighting the aim of the meeting, the convener stated that EAC should focus on making recommendations to the government for the next budget, which should meet the requirements of a growing economy and at the same time provide necessary relief to the people.

Regarding the economic performance in the first eight months of the current fiscal year, the finance minister said that the government had not been passing on full price increase to consumers which had negatively impacted revenue collection on petroleum products. He said that a strong investment demand is presently felt in the country and much of the increase in imports is on account of machinery.

Similar trends are observed in credit to private sector, and the stock has grown by 12 percent. He underlined that exports have slowed mainly due to slowing of the world economies but the deceleration is declining. The government has given a hefty incentive package of Rs180 billion, not just to the textile sector but other sectors as well and in the coming months the impact of this will be felt.

Dar informed the meeting that an exercise of rebasing the GDP is ongoing as many new sectors are emerging in the economy and they have not been covered in current statistics. In large scale manufacturing, the coverage is very low and automobile and related sectors are not fully represented. This exercise will capture the true picture of economic progress made and the exercise for improvement in statistics collection is being undertaken with the help of international development partners.

The finance secretary gave an overview of the economy. He highlighted the macroeconomic stability, improvement in energy supply, stability and comfortable foreign exchange reserves that could cover four months of imports.

The FBR chairman, while giving a review of revenue management, highlighted the challenges of reaching the target for the current fiscal year, including low POL prices and zero rating of export sectors, but maintained that the FBR was making all out efforts for reaching the target.

In his presentation, Abid Hasan stressed upon the need to lower corporate taxes, taxing the wealth created in real estate and stock market. He also underlined the need for narrowing the trust gap between the FBR and the taxpayers, making the tax return simpler and instituting periodic quality of service survey of taxpayers after 2-3 years to get feedback for further improving the tax administration.

Qazi Azmat Isa highlighted the regional inequalities in Pakistan as a cause of concern and stressed upon government intervention in this regard to improve the situation. He underlined that the China Pakistan Economic Corridor will pass through 100 of the poorest union councils of the country, mostly in Balochistan and help in generating employment opportunities in these backward areas.

Sakib Sherani’s proposals focusing on policy advice covered the areas of public debt, reviving exports and improving public finances. He emphasized upon improving the ease of doing business to improve investment, reducing taxes so that growth could be promoted and further improving the efficiency of public expenditures.