WEBDESK: International Monetary Fund (IMF) Chief De Mission for Pakistan Harold Finger has stated in an interview that China-Pakistan Economic Corridor (CPEC) is of great significance for economic development of Pakistan as it can provide the required infrastructure to improve Pakistan’s competitiveness and create a business-friendly environment.
Not only has he underscored the need for giving priority to the infrastructure projects included in CPEC, he also stressed the need for carrying out proper inspections, undertaking accurate assessment of priorities with correct cost estimation and making timely availability of funds.
He has, however, asked the government to remain within budgetary allocations. Injecting a lot of clarity in his argument, he has suggested that the fiscal deficit target is not exceeded while projects are built as per the Public Sector Development Programme (PSDP).
Finger wants the fiscal deficit target to be met and not be exceeded in the guise of expenditure under the CPEC. And, the target of fiscal deficit for 2015-16 of 4.3 percent of GDP too should be maintained. If a cut is to be applied to expenses under the PSDP the policy should remain unchanged. Unfortunately, however Finger is not acknowledging the fact that Pakistan is a resource-scarce country where demands are numerous and resources limited.
He needs to recognise that IMF’s prescription of austerity has already caused a reduction in growth. A fall in inflation and a marked reduction in POL expenditure have provided Pakistan a window to boost expenditure on its crumbling infrastructure. Prime Minister Nawaz Sharif has said that funding under the CPEC is “neither a loan nor a grant but an investment”. The Chinese leadership has, however, stated that “both sides will jointly provide financing support”.
It is clear that Beijing does not plan to use either the Asian Infrastructure Investment Bank (AIIB) or its Silk Road Fund to finance the $46 billion earmarked for CPEC and wants that money needs to come from both countries. However, no allocation is made in the Federal PSDP for 2015-16.
Therefore, Pakistan should immediately establish an Infrastructure bank to provide a rupee component for the projects envisaged under the CPEC. After all, infrastructure constitutes basic physical and organisational infrastructures and facilities needed for the operation of a society or an enterprise.
Approximately, $28 billion is needed immediately for projects out of $46 billion agreements signed under the CPEC. Major upgrades are needed in Pakistan’s transport infrastructure besides building 10,400 megawatts of Pakistan’s energy grid through coal, nuclear and renewable energy projects.
Converting the defunct IDBP as well creating a new Infrastructure bank has been on the table for a long time. International equity investment has been also available in this regard. The crumbling infrastructure needs to be renovated. Local capital for the infrastructure bank can be raised from domestic banks.
However, there is neither the expertise available in government nor there appears to be willingness to do it. We have made plans for an Export-Import (Exim) Bank but it has yet to see the light of day- while our powerful eastern neighbour has already provided $15 billion facility to buyers of its goods. We are neither focusing on exports. Moreover, nothing has been done to improve the infrastructure to reduce the cost of doing business.
The Prime Minister and his team appear to be exclusively focusing on the power sector. Nepra has already adversely commented upon it; while IMF’s Harold Finger also appears to be dissatisfied with the current shape of circular debt. Power shortages are keeping PML(N) leadership involved in fire-fighting most of the time. Is it due to our growing dependency on a few personalities instead of creating an institutional mechanism?
Is this not bogging us down? Without generating additional local resources, our dependence on outside sources is bound to increase instead of diminishing. This is not due to any lack of resources but more on account of lack of imagination and foresight. Why do we keep on repeating the same mistakes over and over again? We make the same mistake over and over again because we do not distinguish if the new situation is exactly the same as previous situation which we know how to react to. Complacency is not an option, but then who cares?