Progress pushes prices skywards

ISLAMABAD: Federal Minister for Finance Asad Umar on Wednesday said that increasing inflationary pressures was a big worry as stabilisation required adjustments in the wake of massive losses on internal and external fronts of the economy.

He said when progress takes place, prices go up. He said inflation will increase further and people will cry. The people will have to go through the pain in the wake of massive electricity and gas sector losses, he further said.

He said that the biggest challenge was curtailing the budget deficit but it would not be allowed to hike it to seven percent of GDP. The IMF is demanding free float of exchange rate but the government wants to move ahead towards this objective in a phased manner.

“The timing and pace of adjustments on flexible exchange rate is a matter of difference but now the differences had narrowed down between Pakistan and the IMF,” Federal Minister for Finance Asad Umar said while briefing members of the National Assembly Standing Committee on Finance here at the Parliament House. The parliamentarians belonging to the opposition benches, especially Ayesha Ghous Pasha of PML-N and Naveed Qamar, criticised the government and raised questions about the dwindling situation on economic front.

The minister said that inflation was big worrying thing for the government and it was hurting the people of Pakistan. He said that the government was undertaking policy measures to protect the vulnerable segments from adjustment shocks.

He said that the inflationary pressures were expected because the electricity and gas prices were put on hold for winning the last general elections. The electricity prices were not increased that caused Rs450 billion loss while gas prices were not adjusted upward causing Rs600 billion loss in four years despite changing energy mix and increasing dependence on imported LNG.

He said that the inflation in first six months of the PTI-led regime went up by 2.4 percent while it increased by 10 percent during first six months under PPP rule in 2008 and 5 percent during first six months of the PML-N rule in 2013.

He said that he did not want to disclose at this juncture exact figures of Net International Reserves (NIR) held by the State Bank of Pakistan when the PTI led government assumed powers in August 2018 as he was pursuing Miftah Ismail to share NIR figures publicly. “We were effectively at default stage but I will not share further details,” he added.

On fiscal front, Umar said the civilian expenditures were reduced by 3.3 percent through austerity measures but the interest payment was projected to escalate the debt servicing bill to the tune of Rs400 billion at least. While responding to comment of opposition member Qaiser Sheikh that the budget deficit might touch 7 percent of GDP, the Finance Minister said that it would not hike to such level as he would talk on this on June 30.

On FATF front, the minister said that Pakistan became successful for FATF complying review till January 2019 but now the country would have to demonstrate its ability to deliver on investigation, prosecution and penalising those involved in money laundering and terror financing till coming May 2019.

He offered the parliamentarians to give them in-camera briefing about the steps taken against proscribed outfits and stated that all state institutions were fully aligned to demonstrate “political will” against these outfits. He said that the cabinet committee on legislative business approved changes in the money laundering law and the bill would be tabled before the Parliament. On Anti-Terrorism Act (ATA), he said that the ordinance got lapsed and now the government of Pakistan reassessed its position that there was no need to amend this law.

On the question of slow disbursement from multilateral creditors especially from the World Bank by Ayesha Ghous Pasha against envisaged projected inflows of $11 billion, the minister replied that the delays in disbursement was an issue on medium to long term basis because of government’s efforts to bring improvement in PPRA rules. Firstly, he said that the policy loans from international creditors were suspended from the period of the last regime because of insufficient foreign currency reserves and stated that the foreign inflows materialized last year stood at $2.3 billion against total disbursement of $4.7 billion. There was inflow of $2.5 billion on account of Eurobond last year. For the current fiscal the government has projected inflows from multilateral to the tune of $5.6 billion which will be materialised.