Harsh steps needed to stabilise economy, says Dar

Accusing the PML-Q and caretaker governments of fudging figures and mismanaging economy, Finance Minister Ishaq Dar has said that the new government will have to take harsh measures over the next 75 days, including increase in oil prices and rationalisation of taxes, to put the economy on the right track.

“The budget expenditure overruns amount to Rs522 billion which the government needs to arrange in the next two and a half months to maintain the level of fiscal deficit at 6 per cent by June 30 against the target of 4 per cent. Then we will have to secure $2.5 billion to increase foreign exchange reserves to $15 billion from $13.5 billion,” the finance minister said at a news conference. He was accompanied by Information Minister Sherry Rehman.

If these measures were not taken, Mr Dar said, the fiscal deficit would rise to 9.5 per cent of the GDP, and at that level, the deficit would be “almost unmanageable”.

Interestingly, President Musharraf had levelled similar allegations when he had removed the Nawaz Sharif government in October 1999. He had also come up with a long charge-sheet of economic mismanagement.

He said that the largest portion of the budget overrun was because of the Rs138 billion subsidy on petroleum products and Rs70 billion on account of non-payment to Wapda, adding that no budgetary provisions had been made in that regard. An additional expenditure of Rs45 billion was incurred on importing wheat and there was no budgetary provision for that either.

He conceded that the Public Sector Development Programme (PSDP) had to be cut to enable the government to handle growing financial difficulties and said that while he did not want to give the impression that everything had been lost or the situation was incurable, “some … mechanism has to be in place to deal with this serious economic situation.”

He said that the Senate’s Finance Committee and the new Public Accounts Committee would summon former prime minister Shaukat Aziz, former finance minister Dr Salman Shah and the two previous finance secretaries to explain their roles in what he termed “bringing the country to a dangerous point”.

“Nobody will get away. Everyone will have to face accountability,” he said.

Mr Dar said that the new government had acquired a $300 million oil facility from Saudi Arabia which would be used to lower the fiscal deficit. He also hinted that foreign aid would be sought to pull through till June 30. However, he promised that the government would not borrow from banks to meet its expenditure. The government planned to stabilise the economy by reviving agriculture and manufacturing sectors.

The strategy, he said, also envisaged tackling energy crisis by increasing generation capacity and conserving energy, arresting the spiralling inflation. He called for re-orienting monetary and fiscal policies to support growth and said spending on pro-poor programmes would be increased, targeted social protection programmes would be launched and fiscal deficit and balance of payments deficit would be contained.

Harsh steps needed to stabilise economy, says Dar -DAWN - Top Stories; April 10, 2008

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