WEB DESK: Finance Minister Ishaq Dar said the completion of the Eleventh Review was indicative of government’s strong commitment in implementing difficult structural reforms in areas of taxation, energy, monetary/financial sectors and public sector enterprises.
Highlighting the overall Programme Performance at a press conference here, Dar said that “Our performance on the Eleventh Review has been highly satisfactory”.
He said, “We met all of the end-March 2016 Quantitative Performance Criteria – SBP’s Net Domestic Assets, Net International Reserves, Foreign currency swap/forward position by significant margins”.
Similarly, he said, the Quantitative Performance Criteria on government borrowing from the State Bank of Pakistan (SBP) and budget deficit for end-March, 2016 had been over performed underlining government’s commitment to sustained fiscal consolidation.
The Finance Minister further said that indicative target for end-March, 2016 on targeted cash transfers through Benazir Income Support Programme (BISP) and on power sector arrears were also met.
Federal Board of Revenue (FBR) not only achieved its third quarter target of Rs 715 billion but exceeded it, thus wiping out almost the entire shortfall recorded in the FBR collection for the first quarter, he added.
This indeed, he said was a remarkable achievement as for the first time after several years, no downward revision has been made in FBR targets and “we are on course to achieving the originally fixed targets”. The Finance Minister further said that against the indicative target of Rs 2105 billion for the first nine months of the year, FBR has collected Rs 2103 billion.
The collections, he said, improved by around 19 percent as compared to the last fiscal year. Dar said that “We achieved real GDP growth rate of 4.24 percent in FY 2015, which is the highest in the last 7 years”.
In view of the damage to the cotton crop, he said the growth rate for the current year was expected to be around 5 percent, which would be an 8 year high.
For the next fiscal year, growth was projected at over 6 percent in our macroeconomic framework. The Finance Minister further said that the Large Scale Manufacturing (LSM) growth remained robust at 4.4 percent during July-February 2016 compared to 2.4 percent last fiscal year.
The LSM growth, he said, was the highest in the last 8 years. Dar further said that major sectors like Automobiles registered growth at 28 percent followed by Fertilisers 16 percent, Rubber products 11.6 percent, Leather products 11.5 percent, and Chemicals 11.2 percent. The cement dispatches witnessed uptick by over 19 percent and there had been a continued credit expansion, he added.
“A welcome development is the increase in fixed investment”, he said adding that electricity and gas supplies continued to improve since the start of the current fiscal year. The China Pakistan Economic Corridor (CPEC) will also play a significant role in further boosting economic activities.
The Pakistan Stock Exchange (PSX), he said, had scaled a new height of 36,265 index on May 10, 2016 crossing the highest index achieved previously in August, 2015 indicating a robust economic activity and reflecting investor confidence.
Inflation, he said, remained contained to less than 3 percent during the period July-April FY 2016 as compared to 8.62 percent in FY 2014 and 4.53 percent in FY 2015. About Balance of payments (BoP), Dar said the external sector was stable on the back of continued growth in remittances despite high base, continued flows from IFIs, a stable exchange rate, and low oil prices, which helped contain the current account deficit.
The foreign exchange reserves, he said, were close to $21 billion as of May 9, 2016 of which SBP reserves stood at $16.125 billion and that of scheduled banks at $4.802 billion.
Highlighting Financial and Fiscal Performance, he said the banking sector remained steady with improved earnings and robust solvency. The sector has a high Return on Assets (RoA) of 2.3 percent and a strong Capital Adequacy Ratio (CAR) of 16.3 percent, well above the 10.25 percent minimum regulatory requirement.
“We are continuing with the financial sector reforms agenda for strengthening the legal, regulatory and supervisory framework aimed at safeguarding stability of the financial sector,” he remarked.
The Finance Minister said the budget deficit which stood at over 8 percent of GDP in FY 2013 was brought down to 5.3 percent in FY 2015 and was targeted for 4.3 percent in current FY 2016. “We are also committed to reducing public debt, and lay the foundations for a more sustained growth,” he added.
Dar said that despite the fact that the government was reducing its fiscal deficit, allocation for Public Sector Development Programme (PSDP) had doubled and social safety net expenditures had increased by 267 percent through three budgets of the current government.
The ratio of FBR taxes to GDP, he said had improved significantly over the last two years, from 8.45 percent in FY 2013 to 9.5 percent in FY 2015, and was projected to increase to 10.2 percent in the current fiscal year.
Moreover, he said that in the same period the total tax revenue had increased from 10 percent of GDP to 12.2 percent. Highlighting Social protection, the Finance Minister said that government was committed to supporting the poor and the most vulnerable segments of population through BISP.
“With a significant expansion in allocation of BISP cash transfers, which has been enhanced from Rs 40 billion in FY 2013 to Rs 107 billion in FY 2016; increasing the coverage from 3.7 million to 5.3 million families; and extensively enhanced income support annual stipend from Rs 12000 to Rs 18800 during this period,” he remarked.
In partnership with the provincial governments, a significant progress had been made in the rollout of the education-Conditional Cash Transfers (CCT) to the targeted needy students, he added.
Currently, he said, more than 1 million children were beneficiaries of the CCT in 32 districts across the country. “We will further expand the total number of children benefiting from the programme to 1.3 million by end-June 2016,” he remarked. About Debt Management, he said that “We continue to diversify financing from both domestic and external sources, lengthen the maturity profile of domestic debt and improve the balance between domestic and external debt.”
The Minister said that to achieve these objectives, “We are working to strengthen the Debt Policy Co-ordination Office (DPCO). We have appointed the Risk Management staff and the Medium Term Debt Management Strategy (MTDS) has already been published. Rate setting between retail and wholesale markets have also been synchronised.”
Regarding Energy Sector, the Finance Minister said the energy sector reforms was on priority agenda of the government and was regularly monitored by the Prime Minister through the Cabinet Committee on Energy. He said that to implement the reforms “We are working to reduce energy shortages with special emphasis to ensure sustained supply to industry with the goal of adding over 10,000 MW of electricity to the system by March 2018”.
“We have added imported Liquefied Natural Gas (LNG) to the system, which has improved energy supply in the country, especially to the industrial sector, as the import of LNG has doubled to 400 mmcfd,” he remarked.
Regarding Business Climate Reforms, the Finance Minister said that for improving business climate, “We have finalised and put into implementation a new countrywide ease of doing business reform strategy with time bound measures to strengthen business climate and foster private investments”.
“We have developed a comprehensive National Financial Inclusion Strategy (NFIS) to implement financial reforms to meet financing needs of the marginalized and unbanked segments of society”.
The strategy, he said laid a particular emphasis on including the female under SBP guidelines for opening ‘Asaan’ Simple and Small Accounts, banks and Microfinance banks have opened about 750,000 accounts, he remarked.
Regarding Public Sector Entities (PSEs), the Finance Minister said, “We are continuously working to reform PSEs focusing on improving performance, reducing losses and improvement in service delivery”. T
he Finance Minister on the occasion reiterated that Pakistan was committed to successfully implementing the macroeconomic stability programme announced by the Government in June 2013; and positive achievement in meeting the performance criteria under the programme reflected the seriousness with which the programme was being concluded.
“It is not only the quantitative targets but also the rich agenda of structural reforms being undertaken with the aim of stabilisation of economy and creation of room for faster and inclusive growth, and poverty reduction,” he remarked.
Dar said “We have successfully completed the negotiations of the Eleventh Review. This has been a good team effort from both sides. As we move forward, our effort would be to consolidate the economic gains achieved so far towards macroeconomic stability and work towards higher growth and jobs creation”.
The Finance Minister said complimented Harald Finger, the IMF Mission Chief and his team for an outstanding job they have done in conducting the Eleventh Quarterly Review. – APP