Budget 2018-19 to be prepared at current dollar-rupee parity

ISLAMABAD: Adviser to the Prime Minister on Finance Miftah Ismail Friday said the government will prepare the budget 2018-19 at existing exchange rate of Rs115 against US dollar.

Talking to The News, he said no new development projects will be launched at the federal level and the budget deficit will be slashed down to 4.5 percent of GDP in order to stick to the policy of ensuring fiscal discipline.

“Our exchange rate at existing level of Rs115 against US dollar has achieved the required equilibrium and we are going to prepare the next budget at this level.

There is no need of further devaluation of rupee against dollar, as our existing rate will boost exports and discourage imports,” Miftah said.

He said there were two different formulas to analyze exchange rate and Pakistan’s existing rate of Rs115 against US dollar fell into the desired range in accordance with our own formula.

Without naming international creditors, including the IMF and World Bank, he said some others still considered Pak rupee was overvalued a little bit but Pakistan considered that the rupee had achieved parity with other comparable and competing currencies of the globe.

“With this existing exchange rate, our exports can compete with comparable economies,” he hoped and said imports would be discouraged and current account deficit limited to a manageable position.

“Keeping in view this whole situation, we have decided to prepare our next budget at exchange rate of Rs115 against US dollar,” he added.

Asked about proposed decreased allocation for development in the upcoming budget whereby the Finance Ministry through indicative budget ceiling (IBC) proposed Rs745 billion including IDPs to Planning Commission against Rs1,000 billion in last budget, the adviser said he wanted to further slash down this allocation because the government was not going to launch any new development project in the upcoming budget.

“We will allocate resources only for ongoing projects in the Public Sector Development Program (PSDP) for 2018-19,” he added.

He said the government would not allocate any bloc allocations in the next PSDP and it would be left to incoming government for launching projects of their own choice.

“We will leave for them to decide what kind of projects they want to launch when they are coming into power after winning the next general elections,” he added.

Earlier, there was a proposal under consideration to keep bloc allocation in the next budget so that the incoming government could launch development initiative of its choice when comes into power.

The Adviser said that budget deficit would be slashed down in gradual manner as it had hiked to 5.8 percent of GDP in the last financial year 2016-17.

“Now efforts are underway to restrict the budget deficit at 5.5 percent of GDP by end June 2018,” he said and added in the same breath that it would depend upon provinces that how much revenue surplus they generate by end of the fiscal year.

For coming budget, he said the federal government would restrict the budget deficit at 4.5 percent of GDP, slashing down by 1 percent from 5.5 to 4.5 percent of GDP in 2018-19.

“Fiscal discipline will be ensured at all costs,” he said and added that the government would also keep the current account deficit within the desired range,” he concluded.