Pakistan to seek Rs290 bn debt relief from G20 for one year

ISLAMABAD: While identifying potential of seeking $1.8 billion (Rs290 billion) debt relief from G20 for one year, the government and high-powered thinktank have decided to explore possibilities for hedging of oil prices for next two to four years, power sector debt securitisation and creation of fiscal space through rescheduling of foreign and domestic debts.

Pakistan will seek debt from G20 next week, said a top official of Finance Division on Saturday after attending a high-level meeting.

Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh chaired the second meeting of the thinktank, recently constituted under the directions of Prime Minister Imran Khan, to deliberate on the COVID-19 related economic downturn and mitigation of ensuing risks.

When contacted, former finance minister Shaukat Tareen, who is also part of this thinktank, said the government has asked to go ahead with hedging of oil prices. He said that when he was finance minister a decade ago, he had formed a committee comprising of bureaucrats who took four months but they could not make any decision. Now he had recommended to the PM to go ahead with out of box solution as hedging of oil prices could save a lot for Pakistan’s economy. He said he recommended to the government to prioritise actions and move ahead instead of taking no decisions.

However, the official press statement stated that the forum has been mandated to provide platform for collective thinking on the emerging situation resulting from the COVID-19 related medical crisis and its spillover to economy. Its other members include Shaukat Tareen, Dr Ishrat Husain, Dr Ijaz Nabi, Sultan Ali Allana, Arif Habib and Dr Waqar Masood. Adviser to PM on commerce and finance secretary are also part of it.

After extensive deliberations on emerging themes, the forum identified key areas for policy interventions, including monetary affairs and banking sector, fiscal matters and public finances, social safety nets, SMEs and large businesses, commodity prices, public health challenges and role of private sector and NGOs.

Abdul Hafeez Shaikh apprised the forum about developments at G-20 forum regarding debt relief package. There is potential for $1.8 billion debt deferment for one year under this, whereas proceeds worth $1.4 billion under the IMF have already been received.

Participants highlighted the need for further downward revision in policy rate coupled with passing on the benefits of slashed oil prices in global market to public. The focus of the deliberations remained on strengthening of aggregate demand and supply of the economy, with emphasis on lower income groups and small firms. Need for further liquidity for banks was discussed as strong and vibrant banking sector is essential to boost economy under such strong recessionary headwinds.

Ways to further encourage remittances, agriculture financing and timely lifting of crops and vegetables from small farmers were analysed. The forum discussed the need and scope for bailout package for large businesses and exporters apart from gauging the viability of reduction of GST on consumer goods, from 17 percent to 5 percent, to kick-start consumer spending for next 2 years. The constraints of FBR amid high revenue targets in a shrinking economy were highlighted by the finance secretary. Decision in this regard would be made after detailed consultations.

The progress of ongoing cash disbursements under Ehsaas Programme were shared. The need for gathering reliable data on recently laid-off works and timely cash transfers to the most vulnerable were emphasised. Economists within the thinktank stressed for designing PSDP to facilitate labour intensive projects apart from crafting robust agriculture financing plans. The need for public private partnerships was elaborated to create fiscal space within public sector through these off-balance sheet financing arrangements which encourage private sector participation in public sector initiatives.

Professionals within the group stressed the need of oil price hedging, power sector debt securitisation and creation of fiscal space through rescheduling of foreign and domestic debts. The need for designing lending programmes for housing sector participants came under consideration including facilitation of end-users. The massive scope for mortgage backed financing in Pakistan was also highlighted.

Abdul Hafeez Shaikh took lead in picking most urgent themes for proper policy deliberations and decisions. He shared that Prime Minster Imran Khan may participate in the next session to give boost to the work of this forum which has been constituted to provide intellectual and professional insights to the ministry in designing and implementing incentives for economy in pragmatic fashion.

The adviser decided that interventions with highest, medium and low impacts would be sorted out and aligned on the basis of short, medium and long-term time horizons so that most essential tasks are pushed on priority basis, with proper funding and execution arrangements.

It was also decided that international thinktanks will be engaged for cross-leaning for select policy making players in Pakistan so that robust interventions are designed to bring relief to economy and most deserving segments of public.