Planning Minister Ahsan Iqbal and former finance minister Ishaq had always rejected the contents of World Bank Report “South Asia Focus Fall 2017″in which the challenges confronting Pakistan’s economy were enumerated, which included the burgeoning trade gap , massive external debt liabilities, extravagance in public expenditure and reckless borrowing. But now the true picture of the economy is being revealed in public by the government minister and functionary.
Governor State Bank Tariq Bajwa gave in Camera briefing to the National Assembly Standing Committee on 20th December about the widening trade gap which according to the independent economists is $ 12 billion. Now the State Minister for Finance, Rana Afzal has disclosed that Pakistan has to pay back $ 6 billion foreign loans in the next 6 months but hastily added that the government was in a position to manage it. This is what the independent economists predicted two months ago but the government did not agree to their analysis. This figure of foreign debt repayment is significantly higher than the $ 3.6 billion which Finance Secretary Shahid Masood shared with National Assembly Standing Committee last week. The state Minister for finance admitted that next six months are crucial for the management of the economy. However, he categorically stated that the government has no plan to go to the International Monetary Fund IMF) for bailout.
In recent years Pakistan external sector obligations have mounted enormously after huge loans contracted by the PML-N and PPP governments in the past nine and half years. These foreign debts and profit repatriation obligations will balloon further after 2020 when CPEC will start maturing. The current account deficit has widened significantly due to growing imports and shrinking exports, bringing foreign currency reserves under strain. Gross official foreign currency reserves stood at $ 14.133 billion on December 22, hardly sufficient for three months imports. How the government manages the external debt repayment of $ 6 billion when the sliding foreign exchange reserves are shored up with loan acquired by floating Euro and Sukuk bonds is a million dollar question? The minister also underscored the need for bringing clarity on the foreign direct investment (FDI) issue under CPEC. There are some proceeds that are neither recorded as FDI nor were reflected in imports.
The IMF is constantly urging the government to expand the tax base by way of direct taxation but the half hearted measures have increased the number of tax return filers from 0.914 million to 1.14 million, a net increase of 10 000 new tax return filers. Like the previous PPP government, the present PML-N government also lacks the political will to bring the 3.8 million wealthy people under the tax net the data of whom is available with the Federal Board of Revenue. The reluctance of the government for tax reforms have emboldened 42 percent of registered companies not to file tax returns what to speak of large number of unregistered partnership firms. The present government will prepare and pass the next year budget from the parliament but it has not yet decided how to raise faineances for the current and development expenditures. The state minister for finance has ruled out to avail IMF bail out. If it is so then the resource gap will be filled by acquiring high interest bearing loans from Pakistani and foreign banks. The international lending agencies have repeatedly cautioned against excessive borrowing. World Bank is insisting on the passage of Public Finance Management Bill to ensure fiscal discipline and austerity in non-productive expenditure. The prices of petroleum products will be increased as Oil and Gas Regulatory Authority (OGRA) has recommended five percent increase in their price structure. It will further pent up inflationary pressure in the economy and accelerate the declining trend of exports. Let us hope the legacy of “Darnomics”will end and sanity will return to financial management of the government.
