Plans afoot to boost infrastructure spending by 40pc

ISLAMABAD: Pakistan plans to boost spending on large infrastructure projects by as much as 40 percent to create jobs and foster productivity in an economy crippled by the coronavirus pandemic, Finance Minister Shaukat Tarin told Bloomberg.

The federal government will earmark as much as 900 billion rupees ($6 billion) for development expenditure in the year beginning July, Tarin, who took office last month, said in an interview. The economy needs to expand by 5 percent next year, he said. “That’s the bare minimum we need for a country this size,” said Tarin, who is due to present a new budget next month for the world’s fifth most-populous nation. “There are almost 110 million youth.”

Tarin, a former banker, was appointed last month as the fourth finance minister since Prime Minister Imran Khan’s government took power in 2018. He also served in the role between 2008 and 2010, helping the nation avoid default by securing a bailout from the International Monetary Fund. He comes into office as Pakistan faces a third wave of coronavirus cases, prompting authorities to order a week-long shutdown that may weigh on economic activity and hurt incomes.

Tarin’s plan will reverse his predecessor’s decision to lower spending to narrow the budget deficit, which he estimates to be a little above 7 percent of gross domestic product in the current fiscal year through June, against 8.1 percent in the previous year.

Tarin said he expects the deficit in the next fiscal to be 1 or 1.5 percentage points lower.

While balancing the budget will be key for Pakistan’s current $6 billion loan program with the IMF, the new finance minister is negotiating with the organisation for more wriggle room to support economic growth.

The government’s GDP target for next year is a percentage point higher than the IMF’s 4 percent projection, and Tarin is seeking to boost growth to 6 percent in the year after. The Washington-based lender sees the economy expanding 1.5 percent in the current fiscal period after a rare contraction last year.

“We need 2 million jobs every year,” he said. “If we do not go into growth mode, we will have a major crisis on the streets.”

The central bank, which has cut interest rates to a three-year low to support the economy, has been on pause mode for a while and has left some of the heavy lifting to the government.

“First we have to get more revenues,” Tarin said, adding that he’s targeting about 6 trillion rupees next year in tax authority revenue, compared with this year’s Rs4.75 trillion target. “Unless we get more revenues, forget about any incentives to boost the economy.” On talks with the IMF, Tarin said “all we are saying is that we are just basically going to give them alternate ways of achieving the same objective,” including revenue generation and reducing energy debt. “The aim is for this to be the last IMF bailout in Pakistan’s history.”