Here is a reproduction of a news item from DAWN
ISLAMABAD, July 12: While the rest of the country was fixated on the face-off between the media and the PML-N, Prime Minister Yousuf Raza Gilani was provided a reality check last week about the precarious economic situation in the country.
He was warned by the finance ministry that with the fiscal deficit touching 6.2 per cent of GDP (Rs925 billion) last year, the government ran the risk of IMF backing out unless it earned Rs500 billion through additional revenue or reduce its expenditures drastically during the current fiscal year.
More serious still, he was informed that the only way of controlling expenditures was to ask the provinces not to exercise their powers to raise additional funds under the new NFC award.
This was the gist of the message hammered home during a presentation by Finance Minister Dr Abdul Hafeez Shaikh and his team to the prime minister during his visit to the ministry.
A major headache in this regard, Dawn has learnt, is the overall fiscal situation which can deteriorate because of inter-corporation circular debt. This, according to the finance ministry’s estimates, will take a 25-30 per cent hike in electricity tariff during the current financial year to breakeven on this count.
However, what makes this crisis unpredictable is that an increase in international oil prices or Pakistan’s failure to produce estimated amount of gas and hydel energy (which would mean more thermal energy and hence more oil) can push these numbers higher.
No wonder then that the World Bank and the IMF, sources told Dawn, had estimated a 49 per cent increase in electricity rates.
As a result, the government has no choice but to check its spending and improve revenue collection. The prime minister was informed that the government had exhibited little fiscal responsibility and failed to limit debt for the third year running because of financial indiscipline by the provincial governments.
Hafeez Sheikh and his team pointed out that the provincial governments, which were expected to provide a surplus of about 0.6 per cent of GDP during the last financial year, ended up with deficits.
The Punjab government closed its accounts with a Rs38 billion deficit, followed by Sindh at Rs27 billion and Balochistan Rs7 billion.
As a result, the provincial governments together contributed about one per cent to the overall fiscal deficit of 6.2 per cent instead of helping to meet the 5.1 per cent target agreed with the IMF.
The prime minister was also informed that Federal Board of Revenue had missed the revenue collection target by about Rs70 billion, excluding over Rs50 billion of refunds. The total revenue shortfall, therefore, remained in excess of Rs120 billion. If the refunds were also excluded, the fiscal deficit could be close to Rs1,000 billion.
MORE BAD NEWS: The bad news for the prime minis ter did not end here. He was informed that the economic situation could further worsen because of the strong parliamentary opposition to the value-added tax (VAT).
The reformed general sales tax could also face practical and administrative hiccups in case the Sindh government did not drop it insistence on collecting the tax on services.
And if the government fails to introduce the uniform reformed GST across the country, it should stop counting on the IMF programme under which more than $2 billion is still to be transferred to Pakistan. As a consequence, the country will not be able to get bilateral and multilateral financial support, increasing the chances of a default.
Mr Gilani was told that if the government wanted to avoid this situation it would have to persuade the provincial governments to check expenditures and prepare themselves for additional revenue generation. The problem the government may face is that the finance ministry cannot rein in the provinces and force them to spend less or to reduce their federal transfers in view of a consensus NFC award.
Therefore, the prime minister had been requested to persuade the provinces to limit their spending to the last year’s level, notwithstanding additional shares they had thanks to the new NFC award to generate a surplus of at least 1.5 per cent of GDP (which translates to about Rs170 billion), the sources said.
According to the sources, the prime minister assured the finance ministry officials that he would raise the matter with chief ministers on Tuesday. |
|
|
It seems that these terrorists are developing their arguments for the total surrender of our autonomy, whatsoever is left, to IMF. To me this deficit and its consequences can be taken as a blessing in disguise as we, the masses, shall not be taking another burden of $2 billion that the IMF has yet to disburse. We all including the so called Servants of the country have to face the stark reality of living within our means so there would be automatic cut in expenditures, no need to worry about increasing trend in expenditures. As the saying goes " Necessity is the mother of invention", when there will be acute shortage of electricity on numbers of accounts, people will find a way to out of this seemingly impossible obstacle. And this necessity shall not be only in electricity but shall be everywhere and when you put the brains of some 200 million people on innovation, then everything and anything is possible. Moreover, we, the masses, shall be relieved of the rampant corruption as Muslims we have faith in Allah (SWT) that He is the One who has all answers to our miseries and as we have shown time and again that in adversity we turn toward Him for help and we then behave or try to behave as closely as possible as Allah (SWT) has ordained.
So, default and save the country from the plunderers.
No comments:
Post a Comment