‘Price hike grieves PM the most’: Govt unveils fiscal stimulus plan

ISLAMABAD: After failure to convince the central bank for slashing discount rate, PTI-led government on Monday unveiled its fiscal stimulus plan for providing additional incentive on housing and exporters loans besides providing cash refunds in order to kick start sluggish economic activities.

The government will provide subsidy on Naya Pakistan Housing Scheme of Rs30 billion and cash sales tax refunds of Rs30 billion besides absorbing decreased markup in shape of subsidy on additional Rs300 billion loan for exporters.

The government decided to cancel promissory note and will provide Rs30 billion refunds through cash to exporters. With the permission of the IMF, the government jacked up limit of sovereign guarantee for power sector by adding Rs250 billion to the limit of Rs1.6 trillion agreed ceiling with the Fund under $6 billion Extended Fund Facility (EFF).

“After achieving stabilisation, the government has taken steps for moving economic wheel of the country. We are confident to surpass the envisaged GDP growth rate target of 3.3 percent for the current fiscal year,” Adviser to Prime Minister on Finance and Revenues Dr Abdul Hafeez Shaikh said while addressing news conference here at PID Center on Monday evening.

Flanked by Special Assistant to PM on Information and Broadcasting Firdous Ashsiq Awan, Minister of State for Economic Affairs Hammad Azhar, Secretary Finance Kamran Baloch, Special Secretary Finance Omar Hamid Khan and FBR Chairman Shabbar Zaidi, Dr Hafeez Shaikh said that the last regime kept exchange rate artificially stable that resulted in “evaporation of $20 to $25 billion” as the country’s exports achieved zero growth in last five years.

He made all-out efforts to defend the government for taking extraordinary care if it was forced to escalate the prices of import dependent products. When asked how much price of electricity would be increased during the current fiscal year, Dr Shaikh replied that the exchange rate depreciated because it was kept artificially high by the last regime that, according to him, had caused loss of $20 to $25 billion because it resulted in de-industrialisation and zero growth in exports in last five years. “Now you cannot blame the PTI-led government for all wrong policies, which we are now correcting and passing through pain,” he added.

To another query regarding building up of foreign currency reserves by $443 million just in one week ended on November 1, 2019, Minister for Economic Affairs Hammad Azhar replied that the foreign currency reserves went up by $1.2 billion in last four months of the current fiscal year. The depletion of reserves had reversed and now these were building up with increased dollar availability, he added. However, top official sources of Finance Ministry again confirmed to The News that the SBP was purchasing dollars keeping in view the surplus liquidity in the market in order to meet Net International Reserves (NIR) envisaged by the IMF.

To different queries on increasing food prices in the country, adviser to PM on Finance said that the government took a number of steps to reduce prices, as the supply side increased to slash the burden of price hike, provincial governments were coordinating and taking administrative steps, zero printing of money for getting borrowing from the State Bank of Pakistan and finally the government curtailed its spending. Federal Secretary Finance Naveed Kamran Baloch told this scribe that the Finance Ministry did not approve single supplementary grants in last four months of the current fiscal year. Dr Shaikh said that the government approved Rs6 billion for Utility Stores Corporation (USC).

Hafeez Shaikh said that the hike in process of commodities grieves Prime Minister Imran Khan the most, adding that the premier always tries that the prices are kept low, and this was the cause that petrol rates have not increase for the past four months. He said that hike in prices are not in public interest. He claimed that the present government and its policies are the worst enemy of hike in prices.

To another query about provinces’ reluctance to provide share to Fata in the aftermath of its merger, the adviser said that the NFC negotiations were underway in order to find out solution through adjustments. However, he said that the government made historic allocation of Rs152 billion for erstwhile Fata in order to mitigate their difficulties in the aftermath of military operations.

He said that the government would introduce reforms in the FBR but so far nothing had been finalised on structural and administrative reforms in the FBR. He said that all the multilateral donors including the ADB, AIIB, IDB, WB and IMF were praising the different steps taken by the government to revive the economy.

In his initial remarks, Dr Shaikh said that the government allocated additional Rs30 billion for Naya Pakistan Housing Scheme as this amount would be utilised for providing subsidy on loans to the tune of Rs325 billion during the current fiscal year. In order to boost up exports, the government subsidy on additional loans for exporters to the tune of Rs200 billion as differential in the wake of higher discount rate would be absorbed through subsidy amount. The limit of borrowing for exporters will be increased by Rs100 billion. On promissory note, he said that the government cancelled it and now decided to provide Rs30 billion refunds in cash amount. He said that the power sector guarantees which were allowed to the tune of Rs1.6 trillion under the IMF agreement now it would be jacked up by Rs250 billion.