Government outlines priorities to “stabilize economy” through fiscal discipline

ISLAMABAD: Pakistan faces a threat of sovereign default on its financial commitments if necessary measures are not initiated to address the fiscal deficit, Adviser to Prime Minister on Finance, Revenue and Economic Affairs Abdul Hafeez Shaikh warned on Monday while outlining the government’s priorities to stabilize the economy through fiscal discipline.
Shaikh presented the pre-budget document, Economic Survey 2018-19, which shows the government has missed all economic targets with a 3.29 percent GDP growth against the ambitious target of 6.2 percent.
The government is scheduled to announce its first federal budget for fiscal year 2019-20 on Tuesday amid plans of the opposition parties to protest against the economic slowdown due to what they call the government’s inefficiency.
Taking a jab at the public expenses, he said the government was spending 2.3 trillion rupees beyond what was it generating in revenues, in addition to it the country’s domestic debt stands around 31 trillion rupees and foreign debt around $97 billion.
“We have a twin deficit, if it is not resolved, will lead us to a default. Make no mistake about it,” he warned while pointing to $32 billion trade deficit due to stagnation in the exports.
“These issues are a threat to Pakistan’s economy … we are so exposed to the foreign loans and foreign exchange which is not matched by our capacity to pay it back. No one has paid any attention to increasing this capacity,” he said.
The adviser said that Prime Minister Imran Khan has a commitment to take “difficult decisions” to steer the country out of economic crisis and double the budget allocations for social safety programs to take care of the poor and downtrodden in the society.
Listing the government’s priorities to fix the economy, he said the government is committed to safeguard the economy and stabilize it, fix the institutions that have been ruined over the time, improve foreign business relations and increase manufacturing, make the rich pay taxes, and ensure strict austerity in the public departments.
“If we fail to collect taxes, we won’t be able to even pay interest on our loans,” he said, vowing to fix all state enterprises which have been incurring an annual accumulative loss to the national exchequer of around Rs1,300 billion.
He said the country’s poor have had their money, health and education compromised because their money has been spent on keeping these “white elephants” alive.
He said that the government would “unveil some sincere steps [to revive the economy] in the budget tomorrow” which will tend to build public confidence.
Shaikh added that an immediate balance of payments crisis was staved off by securing $9.2 billion from three countries, and getting a “$3.2 billion deferred oil payment facility from Saudi Arabia, and a similar facility from Islamic Development Bank.”
About a $6 billion bailout deal recently struck with the International Monetary Fund (IMF), he said that Pakistan cannot become a prosperous country by taking dollars from here and there.
“The people will see we are ready to impose fiscal discipline, ensure balance in our expenditures and revenues and live within our means,” he added.