D.G. (Media) Mr. Hamid Raza Watto
Ph. 9211707, Deputy
Director (Media) Ph. 9211707
|15 May, 2020
No downgrading of Pakistan's B3 rating by Moody's: Finance Division
The Ministry of Finance has said that the rating review conducted by Moody’s Investor Service on 14th May 2020 does not downgrade Pakistan’s B3 rating.
In a statement on Friday, the Ministry has said that the Moody’s Investor Service has only placed the current rating under review for downgrade in case the G-20 Covid-19 Debt Service Suspension Initiative (G-20 DSSI) extends to private sector creditors. The action is, therefore, not Pakistan specific and is in line with Moody’s global approach to place under review for downgrade all sovereigns availing the G-20 DSSI.
The Ministry of Finance has further said that the review by the Moody’s Investor Service acknowledges that Pakistan has not indicated any interest in extending its debt service relief request to the private sector creditors and that the country’s fundamentals remain strong and on track. The review also appreciates that amid the pandemic, Pakistan’s economic, financial and institutional strength remains materially unchanged.
|12 March, 2020
Finance Division denied any cut in
The Ministry of Finance has denied a news report published in a section of the press suggesting and insinuating a Rs 100 billion cut in the Public Sector Development Programme (PSDP) for the current fiscal year as per briefing by the Finance Secretary to the National Assembly’s Standing Committee on Finance and Revenue the other day.
The Finance Division strongly denies and rebuts this news report as the Secretary Finance never stated at any point during his presentation to the National Assembly’s Standing Committee on Finance and Revenue that there could be cut in the federal development programme this year, said an official statement issued by the Finance Division today.
The statement asserted that the Finance Division has actually facilitated maximum and speedy disbursements for the year and there is no cut planned or suggested in the development spending for the current fiscal year. The Finance Division has always provided full support to Planning Division to ensure timely expenditure, said the statement.
|17 February, 2020
Finance Division dismisses speculations
on IMF Review
The Ministry of Finance has described as misleading and factually incorrect a news item published in a section of the press suggesting that tough prior actions [are] needed for IMF’s $452 million third tranche.
In an official statement issued here, the Ministry of Finance has stated that it is completely normal for quarterly reviews to sometimes take a few days more than planned, which must never be viewed as something extraordinary; the second and third quarterly reviews will be presented before the IMF board separately as planned; no decision has been taken as to any prior actions; China is Pakistan’s iron brother and there is no apprehension whatsoever on the roll-over/refinancing of Chinese loans.
The article in question is equally ill-conceived in trying to portray that only a miracle can save the IMF program. The press statement issued by the IMF on Friday explains that:
“The IMF staff team had constructive and productive discussions with the Pakistani authorities and commended them on the considerable progress made during the last few months in advancing reforms and continuing with sound economic policies,” and that “[a]ll end-December performance criteria were met, and structural benchmarks have been completed.”
The Finance Division would like to make it very clear that the Government’s reform program supported by the IMF’s Extended Fund Facility is on track.
|11 February, 2020
Finance Division urges careful reporting
of ebb and flow in stock market
The Ministry of Finance has described certain reports appearing in a section of the press over the ebb and flow of the Pakistan Stock Exchange yesterday as being unfortunate as such reports highlighting sharp volatility in the market damage the interest of the small investors and create uncertainty in the market.
“The role of the media in reporting the ebb and flow in the market needs to be carefully analysed particularly in the wake of rumours spread by a section of the media regarding alleged changes in the government’s economic team which sent wrong signal to the market and damaged the interest of small investors and hurt overall sentiment in the market,” says an official statement released by the Finance Division today.
The Ministry of Finance has noted that it is natural for the market to see a correction after rising sharply by over 50%. “Yesterday, the market fell 846 points. Today the market gained 417 points. These ebbs and flows of the market are driven by sentiments, whereas the fundamentals remain strong and continue to improve.”
The Ministry of Finance also pointed out that after rising by 50% from August 2019 to January 2020, the KSE 100 index had already been named as the top performing market in the world by Bloomberg in December 2019. The improved investor confidence was based on corrective measures taken by the government to reduce the twin deficits. These measures were also strongly endorsed by Moody’s Investor Services in December 2019 with an upgrade in outlook to ‘stable’ from ‘negative’. Foreign portfolio investment in the stock market during the first 6 months of the current fiscal year has also stood at US$ 18.8 million after 4 years of heavy selling by foreign investors.
|10 February, 2020
Govt policies based on good economic
management -- Finance Division
The Ministry of Finance has said that the economic policies and economic reforms programme of the government being implemented with the support of IMF are based on sound and well-established principles of good economic management.
“The objective of these policies is stabilization in the first phase, followed by rapid, sustainable and inclusive growth,” says the Finance Division in response to certain news reports insinuating that the “IMF policies [are] leading to destruction of economy”.
The Finance Division has maintained that the government’s policies have already started showing positive results. There is significant improvement in economic indicators. The external sector has stabilized and the fiscal deficit has declined significantly in the first six months of the financial year.
Low tax-to-GDP ratio is amongst the fundamental problems of Pakistan’s economy. Unless this is corrected, the country cannot achieve prosperity. Therefore, a multi-pronged revenue mobilization strategy is being pursued to broaden the tax base and raise tax revenues in a balanced and equitable manner.
To cushion the low-income groups from any adverse effects of stabilization measures, the Government has allocated sufficient resources for income support and social protection programs and has increased spending on health and education. Furthermore, targeted energy subsidies have been given to the vulnerable group.
|01 February, 2020
Govt borrowed Rs 4.11 trillion to
finance budget deficit in 15 months -- Finance Division
Finance Division lays before the National Assembly the Debt Policy Statement and Fiscal Policy Statement every year to fulfil the requirements laid out under Section 6 and 7 of the Fiscal Responsibility and Debt Limitation Act 2005. The recent statements cover the 15-month period including FY 2018-19 and first quarter of FY 2019-20 and contain all factual information with respect to debt and fiscal performance over the stated period.
The figure of increase in Total Debt and Liabilities by Rs 11.61 trillion being reported in the media needs to be properly interpreted, says a press release issued by the Ministry of Finance, as the Government borrowed only Rs 4.11 trillion to finance its budget deficit.
The figure of Total Debt and Liabilities consists of the following five components:
1. Total Public Debt
2. Public Sector Entities’ (PSE) Debt
3. Debt for Commodity Operations
4. Foreign Exchange Liabilities of State Bank of Pakistan (SBP)
5. Private Sector’s External Debt
Out of the total increase of Rs 11.61 trillion in Total Debt and Liabilities during Jul 2018 - Sep 2019,
- Rs 3.54 trillion (31% of the increase) is due to currency depreciation which is a consequence of the misplaced exchange-rate, industrial, and trade policies of the previous government that led to large and unsustainable current account deficits and ultimately to sharp exchange rate adjustment;
- Rs 3.13 trillion (27% of the increase) is on account of cash balances and SBP’s foreign exchange liabilities. It should not be interpreted as Debt because it is offset by cash balances of government and liquid assets of SBP.
- Rs 4.11 trillion (35% of the increase) has been borrowed for financing of fiscal deficit;
- Rs 0.47 trillion (4% of the increase) has been borrowed by PSEs for spending on their financing needs;
- Rs 0.08 trillion (-1% of the increase) has been retired on account of commodity operations which is a welcome development;
- Rs 0.25 trillion (2% of the increase) is due to accounting adjustment due to difference in realized value and face value of long-term bonds issued during this period;
- Rs 0.18 trillion (2% of the increase) has been borrowed by private sector from external sources which is a healthy sign indicating private sector’s capacity to borrow from abroad for domestic investments.
|26 January, 2020
Division has taken a strong exception to a news
report published in Daily Express Tribune and Daily
of Finance has taken a strong exception to a news
report published in Daily Express Tribune and
Daily Express insinuating and portraying a situation
of clash between two government departments over
the government’s foreign borrowing during
July-Dec 2019 period.
In an official statement, Finance Division spokesperson
has described the reporting by both newspapers
as being unethical and against the canons of professional
journalism as their reports twist and paint a
straightforward clarification issued by Finance
Division on 25th January 2020 over government’s
net foreign borrowing of US$ 1.7 billion in the
July-Dec 2019 period, as rejection of data of
another government department which was not even
mentioned in the Ministry’s clarification.
The Spokesperson has maintained that the clarification
issued by the Finance Division was only related
to misreporting in a section of the media of gross
external debt inflows which did not take into
account outflows on account of repayments, and
thereby presented only one side of the picture.
The Ministry had clarified that “whereas
the reported gross disbursement is US$ 5.5 billion
during Jul - Dec 2019, deducting the US$ 3.8 billion
which the government paid back during the said
period leaves a net figure of US$ 1.7 billion
... therefore, the real addition was US$ 1.7 billion,
not US$ 5.5 billion as claimed by a section of
Hence, the reporter has attempted to create a
situation of so-called rift between two government
departments and rejection of data by Finance Division
of another government division whose input was
duly taken in the Finance Division’s clarification,
which is unethical and against the canons of professional
journalism, said the statement.
|24 January, 2020
Rebuttal - Finance Division
rebuts news regarding 20 % drop in FDI
Division has described as factually incorrect
and misleading a news item published in a section
of the press claiming that the foreign direct
investment flows into Pakistan had dropped by
20 per cent in 2019.
In an official statement, the Finance Division
has clarified that a news report published in
a segment of the press has highlighted that Foreign
Direct Investment (FDI) inflows into Pakistan
declined by 20 percent to $1.9 billion in 2019
(calendar year) against $2.4 billion in 2018.
In this context, it is clarified that FDI data
is collected on the basis of fiscal years, whereas
the quoted figure is taken on calendar year basis.
Furthermore, on fiscal year basis, FDI has increased
by 68.3 percent during July-December 2019 as compared
to same period of last year (from $0.797 billion
to $1.341 billion)
Economy moving progressively on adjustment,
The Ministry of Finance has said that the government’s extensive measures have helped the economy move progressively along the adjustment path and stabilization process and economic recovery is expected towards the end of FY2020.
“The government is focused on bringing improvement in the real sector growth through inclusive growth in agriculture, industrial and services sectors,” said a statement by the Finance Division in response to certain news reports carried in a section of the regarding downward revision of growth by the World Bank.
The government is cognizant of challenges and stringently focused on resolving them particularly, reducing inflation, creating job opportunities and achieving high growth rate. Keeping in view the positive developments on major economic indicators, we expect that the economy will likely to achieve better growth prospects as against the projections of the World Bank.
The World Bank in its report ‘2020 Global Economic Prospects’ had forecasted Pakistan`s current year growth rate at 2.4% before touching 3 % next fiscal year and 3.9 % in FY2022. The bank’s report had also mentioned that the growth had decelerated an estimated 3.3 % in FY2018-19, reflecting a broad-based weakening in domestic demand. In addition, the report had described that significant depreciation of the Pakistani rupee resulted in inflationary pressures, monetary policy tightening restricted access to credit, curtailing public investment to deal with large twin deficits and budget deficit rose more sharply than expected.
It may be pointed out that during FY2019, the slowdown in economy was largely attributed to various policy measures to manage the twin deficit crisis. Consequently, these measures helped to contain demand pressures and contributed to import compression. However, the outcomes of these measures were realized on the industrial sector. Particularly LSM sector witnessed a negative growth. At the same time, high input costs along with water shortages weakened agriculture sector’s output and hence, the drag in the commodity-producing segments spilled over to the services sector as well. Resultantly, the real GDP growth recorded at 3.3 percent.
At the start of current fiscal year, with government’s extensive measures, Pakistan’s economy is now moving progressively along the adjustment path and stabilization process; however towards the end of FY2020, economic recovery is expected. In this regard, Government is focused on bringing improvement in the real sector growth through inclusive growth in agriculture, industrial and services sectors.
For growth in agriculture sector, the target production of wheat is 27 million tons given by FCA in last meeting held in October. In addition to uplift agriculture sector “National Agriculture Emergency Programme” in coordination with all provinces has been introduced and approved 13 mega projects at the cost of Rs 287 billion. Agriculture credit disbursement target for CFY20 has been set at Rs.1,350 billion. Agriculture credit disbursement increased by 20% to Rs 482 bn during Jul-Nov, FY2020 against Rs.402 bn last year.
To boost industrial sector, the government is providing a series of subsidies and incentives to industrial sector. These include subsidies to industry for electricity and gas, export development package and continue to provide Long-Term Trade Financing (LTFF) and Export-Refinancing Scheme (ERS) at subsidized rate.
Similarly, PSDP release process is simplified and up to 3rd January, 2020 Rs.301.4bn (Rs.225.4 bn) released to encourage construction related industries especially cement & steel. In addition, Cement dispatches growth of 6.55% (24.8 mn) during July-Dec, FY2020 against 23.2 mn in the last year. This development would likely stimulate the growth in LSM in coming months.
On fiscal side, to control expenditures, government is following austerity measures with complete restriction on supplementary grants. For export promotion several initiatives have been announced such as support duty structure on raw materials and intermediate goods, improve mechanism for tax refunds, provide electricity and gas at competitive cost, and make Pakistan part of the global value chain.
Government’s various measures to stabilize the economy has already started to reap benefits in the form of sustained adjustment in current account deficit (CAD) and continued fiscal prudence. A brief review indicates that CAD reduced by 72.9% during July-November FY2020, Fiscal deficit contained at 1.6% of GDP (Rs 686 bn) during Jul-Nov FY2020 ,Primary balance posted surplus of Rs 117 bn during Jul-Nov, FY2020 (0.3 percent of GDP), significant rise in FBR tax revenues to Rs.2085.2 bn (16.4 %) during July-December, FY2020, improved ranking in ease of doing business, ranked among the world’s top 10 best business climate improver and ‘Stable’’ credit outlook to B3 from ‘Negative’ by Moody’s is an affirmation of Government’s success in stabilizing the economy and laying a foundation for robust growth.
Development Spending Grows by 27%
in Four Months -- Ministry of Finance
The Ministry of Finance has said that the development spending during the first four months witnessed a growth of 27% compared to the same period of last financial year while the development spending of the four provinces (combined) during the first four months also stood at Rs.112 billion as compared to Rs.88 billion spent during the same period of last financial year.
“It is incorrect to say that the provincial government has provided the surpluses at the cost of development activities,” said the Finance Division in an official statement in response to certain media reports appearing in a section of the press claiming that the "provinces forego uplift plans and return Rs.202 billion to Centre".
In its statement, the Ministry of Finance described the media reports as "misleading" and "incorrect" and maintained that as per the factual position, neither the provincial surplus is Rs.202 billion nor the surplus amount had been transferred/ returned to the federal government. The actual provincial surplus for the period July-September, 2019 is Rs.190 billion, it added.
The Finance Division further stated that according to standard procedure federal transfers are made to the provincial governments as per NFC formula and are transferred from Federal Government Account to the respective Provincial Government Account maintained with State Bank of Pakistan. The amount so transferred remains available to the respective Provincial Government all the time in their separate accounts with State Bank of Pakistan.
The statement further clarified that the Ministry of Finance compiles and consolidates fiscal operations of State of Pakistan (Federal Government and all the four provincial governments) on quarterly basis. The cash balance position of Federal Government and provinces is shown in a consolidated manner. The consolidated cash surplus position helps in driving the fiscal policy of the Government. Federal Government has neither a role in provincial expenditure planning nor its spending. Provincial surplus for the same period of last financial year was Rs.199 billion.
Rebuttal - Ministry of Finance
rebuts newspaper editorial on 'flawed narrative'
Ministry of Finance has rebutted an editorial
published in a Karachi-based business newspaper
accusing the Minister for Economic Affairs Division
Mr. Muhammad Hammad Azhar of a “flawed narrative”
even as the Minister has discharged his responsibilities
as an official spokesperson of the Federal government
representing the collective view of all economic
In an official statement, Spokesperson Ministry
of Finance has said that the views expressed by
the newspaper in its editorial captioned ‘Azhar’s
flawed narrative continues’ dated 07 November
2019 are a fanciful articulation of personalised
nature rather than being an objective assessment
of the spokesperson’s narrative. The editorial
makes some sweeping claims that are not based
on data but either inaccurate information or simply
The newspaper claims that the Minister’s
comparison of the first-year inflation figures
of PTI with PMLN & PPP is not appropriate.
The Minister has simply reminded the protesting
opposition parties that the inflation rates during
their own tenures rose to higher rates as compared
to the first 13 months of PTI government.
The newspaper dismisses the achievement of Foreign
Portfolio Investment flows becoming positive in
Pakistan after three years and links this inflow
to the of loss of employment in SME sector. This
is stated to be not based on any data but an ‘anecdotal
survey of Islamabad’. The above merits no
The stock market’s surge of 6500 point since
August that the Minister mentioned in his presser
is reported as 500 points in the editorial and
then dismissed as not warranting importance because
the market has players that according to the editor
‘manipulate’ the stock market and
does not cover 99% of country’s population.
This view is quite opposite to the importance
that Business Recorder itself gives to the stock
market on a regular basis, printing analysis,
reports and headlines carrying its movement and
The improvement in fiscal deficit In Q1 FY20 is
then criticized in the piece for being compared
to the last year, which in fact is a standard
practice. The PTI government achieved success
in curtailing the external deficit in its first
year of government by 32% (and further by 64%
in first quarter of FY20). Now the government
has focused on fiscal consolidation in this year
(first quarter fiscal deficit is 0.7% vs 1.4%
last year). This is rational sequencing and is
now acknowledged by informed analysts. The editorial
itself mentions ‘appropriate phasing’
as the correct strategy to ease the stabilisation
The claim of rising export volumes is disputed
in the editorial and is attributed largely to
increase in rice import by China. Data on volume
of exports published for last year and this year
shows the above assertion to be incorrect. During
last fiscal year, as per the SBP, the total volumes
of export grew by 12%. The breakdown of exports
provided by PBS shows that exports of Cotton Cloth
increased by 16.61%, Bedwear by 8.18%, Readymade
Garments by 32.77% and Knitwear by 15.52%. The
above make up for 40% of Pakistan’s exports.
The first quarter data of this FY20 also shows
a healthy increase in volumes. Therefore, to attribute
the entire exports volume growth to just rice
imported by China is not supported by data and
shows bias in the newspaper’s analysis.
The decrease in circular debt flow is contested
in the editorial. During the last year of PMLN
government, circular debt flow was Rs 38 Billion/month
on average, whereas during the first year of PTI
government it reduced to Rs 27.8 Billion/month.
This year it will be less than Rs 12 billion/month
on an annual average. The Power Ministry has confirmed
Lastly, whilst making personal attacks, the newspaper
has also portrayed Minister Hammad Azhar as purely
a lawyer and ignored the fact that he graduated
in Development Economics from the School of Oriental
and African Studies, University of London. He
also has experience in managing industry for the
last 13 years.
It is hoped that the newspaper
in future will desist from such subjective analysis
based on personal and biased views which is not
the hallmark of a standard bearer newspaper such
as ‘The Business Recorder’.
Rebuttal - 3.3% growth in FY19
and host of economic measures set to benefit common
of Finance has said that the government’s
macroeconomic adjustment and demand management
policies for stabilization have started making
an impact as visible in the moderate growth of
3.3 % in the FY2019 as well as introduction of
a host of measures to bring down inflation, jack
up economic activities, strengthening of social
security net, increase in employment opportunities
and containment of fiscal and trade deficits.
The result of what has been achieved so far needs
to be seen and contextualised in the backdrop
of a very difficult situation of the economy inherited
by the government and how the measures taken by
the government during the last one year have not
only effectively checked the economic slide but
turn the wheel in various sectors of the economy
to ensure their long-term fruits for businesses
and the common man.
In a detailed statement, the Finance Division
has rejected the news reports published on the
basis of a news article in an online international
newspaper and claiming that the “Voters,
traders feeling pain of the government’s
economic plan” due to what the report suggests
as rising inflation and other reasons.
The Finance Division has maintained that at the
very outset, it is important to mention that when
the present government assumed the office, the
economy was facing multiple challenges relating
to fiscal, external and real sector of the economy.
The unaddressed macroeconomic imbalances and long
awaited structural reforms needed urgent policy
actions. To address these issues, the present
government thus introduced a comprehensive set
of economic and structural reforms and the impact
of macroeconomic adjustment and demand management
policies for stabilization were now visible as
FY2019 witnessed moderate growth of 3.3 percent.
The Finance Division pointed out that the media
reports while referring to increase in prices
did not take into consideration the major causes
behind this rise and instead stated the figures
whereas major reasons for the rise in inflation
are (i) sustained pressures on twin deficits which
induced the government to adjust administered
prices upwards and also impose regulatory duties
on imported items; (ii) supply constraints of
certain food items and imposition of FED on cigarettes;
(iii) and the impact of rise in fuel prices and
exchange rate depreciations.
The Finance Division has further stated that the
rise in inflation was mainly due to delay in policy
adjustments required during FY2018 as the present
government had to make difficult decisions of
upward adjustment in overdue gas and electricity
prices, market-based exchange rate adjustments,
increase in interest rates etc to correct the
macroeconomic imbalances. The government also
adopted prudent expenditure management and contractionary
monetary policy to compress the aggregate demand.
To this effect, the State Bank of Pakistan raised
the policy rate to 13.25% to arrest inflationary
The Finance Division further
clarified that the government was making all efforts
to control inflation by ensuring smooth supply
of commodities, checking undue profiteering &
hoarding and vigilant monitoring of prices both
at federal and provincial level. To address the
issue of severe macroeconomic instability and
to put the economy on the path of sustained growth
and stability, some tough immediate steps were
required. The present government thus introduced
a comprehensive set of economic and structural
reforms. In this regard, Finance Division has
worked out a strategy to control inflationary
pressures in the economy.
The Finance Division also
reminded that the ease of doing business was also
improving at the fast pace, as in 06 indicators
out of 10, there was significant improvement in
Pakistan and the World Bank had placed Pakistan
in top 20 best performers in ease of doing business.
Pakistan follows liberal investment regime for investors’
confidence and conducive environment to attract
local and foreign investment. During September FY
2020, the FDI recorded at US $ 385.3 million showing
an increase of 75.6 percent as against US $ 182.1
million during the same month last year.
Explaining the measures to control inflationary
pressures on the economy, the Finance Division
said the government had discontinued borrowing
from the State Bank of Pakistan which had an inflationary
impact, and switched to commercial banks for borrowing
which was less inflationary in nature. Similarly,
National Price Monitoring Committee (NPMC) in
consultation with the provinces was regularly
monitoring the prices and supply of essential
food and non-food items.
The Finance Division further noted that on the
expenditures side, the government was following
austerity measures with complete restriction on
supplementary grants. This is helping to control
the aggregate demand to ease out the inflationary
pressure in the country. The government is also
committed to imposing the burden of adjustments
in energy prices on those who can afford rather
than the poor segments of the society. A subsidy
of Rs. 226.5 billion had been allocated in the
budget for customers who use less than 300 units
of electricity in a month (comprises 75% of total
The Finance Division also referred to the ECC
of the Cabinet’s decision to provide relief
to the ‘Roti Tandoors’ for provision
of cheap roti to the common man by giving the
subsidy of Rs.1.5 billion. Similarly, the federal
and provincial governments are ensuring smooth
supply of essential items at affordable prices
by organising the more sasta bazaars as well as
in the open markets.
The Finance Division also mentioned that social
protection through poverty alleviation programs
had been introduced to protect the poor as the
cost of structural reforms would fall disproportionately
on the vulnerable segments of the society. Under
Poverty Alleviation Division, the government has
allocated an additional amount of Rs.80 billion
in the country’s social protection spending
for 2019-20 with a total allocation of Rs 1 protect
90 billion for the Social Safety Net Programme.
To improve socio-economic condition of the common
man and to boost agriculture sector, the Federal
government is implementing “National Agriculture
Emergency Programme” and has approved 13
mega projects at the cost of Rs 287 billion. The
programme is being executed with the coordination
of all provinces aimed at boosting crops yield,
fisheries and livestock development as well as
To facilitate Industrial Sector, the government
was providing a series of targeted subsidies and
incentives to industrial sector. These include
subsidies to industry for electricity and gas,
export development package and continue to provide
Long-Term Trade Financing (LTFF) and Export Refinancing
Scheme (ERS) at subsidized rate.
During July-September FY2020, exports increased
by 2.4 percent to US $ 6.033 billion against $
5.893 billion in last year. Imports decreased
by 22.7 percent during July-September FY2020,
to US $ 11.032 billion against US $ 14.275 billion
in last year. As a result, the trade deficit had
shrunk to 34.85 percent to US $ 5.727 billion.
With regard to the reports on employment creation,
the Finance Division said that it was important
to highlight that Job creation was one of the
key objective of government economic reform program
and the government was evaluating specific proposals
for job creation with strong participation by
the private sector. The important initiatives
include ‘Naya Pakistan Housing Program’
which is envisaged to construct 5 million homes
over the next five years. With its strong backward
linkages, development of housing sector will also
lead to significant increase in growth of at least
40 different industries.
Similarly, ‘Kamyab Jawan Program’
launched recently had two tiers program whereby
tier 1 ranged from 0.1 million to 0.5 million
while tier 2 ranged from 0.5 million to 5.0 million.
Loans for tier 1 made available at a subsidized
rate of 6% while for tier 2 rate is 8%. 110,000
loans will be disbursed under tier 1 and 29,000
loans will be disbursed under tier 2 over a 5-year
period with subsidy of Rs 15 billion.
The Finance Division also reminded that the government
had allocated Rs 5 billion for Prime Minister's
Youth skill Development in the budget 2019-20
while the government had set a target to create
100,000 jobs in IT in 2019 with the PSDP earmarked
for ICT sector for 2019-20 at Rs.11,140 million,
showing an increase of 52.6 percent
over the corresponding period of last year.
The Finance Division further noted that investments
in tourism had the potential to generate over
half a million new direct and induced jobs over
the next five years. To increase the number of
tourist, the government had introduced an open
Online Visa System for the citizens from 50 Countries.
The government had allocated Rs 2 billion for
Clean Green Pakistan Movement/ Tourism in budget
The Finance Division also said that the 10 Billion
Tree Tsunami would create a total of 2 million
jobs over the life of the project. Similarly,
during calendar year 2018, 3, 82439 people
were registered for overseas employment while
from Jan-August 2019, 373,225 Pakistanis were
registered by Bureau of Emigration and Overseas
Employment for employment as compared to 244,504
emigrants during the corresponding period last
The Finance Division also noted that in the current
budget, government had protected the vulnerable
segments from utility price increases. The government
had also protected the low-gas consumers from
high gas price. Similarly, to keep the Roti prices
at the lower level, the government had been providing
subsidy of Rs 1.5 billion to the Roti Tandoors.
GST on LPG had been reduced from 17% to 10% while
low electricity consumers were also being protected
from full impact of price increase.
Rebuttal - Finance Division
rebuts news report on state of economy
Division has described as “incorrect”
the impression created in a section of the media
that the Pakistan economy is shrinking.
In a statement, the Finance Division has asserted
that the macroeconomic adjustment policies introduced
by the government to support balance of payment
and strengthen the market confidence, which will
also move toward higher and inclusive growth.
The contention of a section of the media talking
about “shrinking economy” seems incorrect
as the early signs of recovery of economic activities
in fiscal year 2020 are very much encouraging.
On agriculture front, Federal government is implementing
“National Agriculture Emergency Programme”
and has approved 08 mega projects at the cost
of Rs. 235 billion. This will encourage economic
activities in rural areas and create employment
opportunities in the country. Credit to agriculture
sector has increased by 20.7 percent; the sowing
of cotton crop has also increased by 14.4 percent
as compared to last year which will increase cotton
crop in double digit. The import of agriculture
machinery has recorded a growth of 8.7 during
FY2019 which is a good indicator. The base effect
will also support growth in agriculture.
Earlier estimates of cotton crop suggest that
cotton production will increase at least by 3
million bales in FY2020 from last year. All these
developments forecast agriculture is likely to
rebound and grow more than 3.0 percent in CFY. This
is likely boost growth in LSM and the exports
of the country, as well. Similarly, the LSM is
likely to recover in current fiscal year on the
back of better expected growth in agriculture
sector along with government initiatives in the
construction, SMEs, tourism and automobile sectors.
Better growth in agriculture and LSM sector are
likely to have a good impact on services sector.
To boost jobs in the industrial sector, the government
is providing a series of focused subsidies and
incentives to industrial sector. These include
subsidies to industry for electricity and gas,
export development package and continue to provide
Long-Term Trade Financing (LTFF) and Export Refinancing
Scheme (ERS) at subsidized rate.
Impact of better cotton production and subsidy
schemes have spillover effect on export growth
and textile sector which will supports further
current account and balance of payments position.
For inclusive growth and to protect the vulnerable
segments of the society, various social protection
programs (through a newly created poverty alleviation
division) have been introduced. Under Poverty
Alleviation, the government has allocated an additional
amount of Rs.80 billion in the country’s
social protection spending for 2019-20 which cumulatively
reached at Rs 190 billion which will also have
spillover effect on private sector activities.
The editor further stated that “the Government
will have to request the Fund for waivers due
to its failure in achieving two performance targets
i.e. tax collection and circular debt. This
is, according to the Editorial, due to failure
of both the Government and the Fund to do their
homework before setting targets for the IMF program
signed by the government in June this year”.
It is clarified that the government has pursued
the performance targets of the EFF program vigorously
during the first quarter of CFY. Resultantly,
tax collection during the period has so far been
16 percent higher than the tax collection of the
same period last year. It is also clarified that
the numbers regarding circular debt have not been
finalized as yet and it is premature to say that
the target has not been achieved and that the
price hike has not worked.
As far as the investment in domestic securities
by non-residents is concerned, it may be noted
that this is a positive development. This will
expand and diversify the investor base and enhance
competition, leading to liquidity in primary as
well as secondary markets.
Over the long-run, greater competition among investors
and greater liquidity in the markets will result
in lowering borrowing costs for the Government
and also increasing the depth of domestic capital
market. This is an aspect not previously covered
or thought-out by the previous governments.
The IMF agreement is based on broader policy reforms
to address the issue of macroeconomic instability
stemming from budgetary and current account deficit.
Most of the targets are related to initiation
and continuation of structural reforms which include
various policy, administration and enforcement
The benchmarks in this program have been set in
terms of qualitative initiatives and not exactly
in terms of numbers. The indicative targets in
numbers are based on certain assumptions related
to growth, imports, exports, inflation, independently
determined policy rate and a market based exchange
rate. Any change in assumed rates in the initial
model results in varying targets such as tax and
non-tax revenues. The tax target is not something
given by IMF but is a number assigned by Government
of Pakistan to FBR as revenue target and so far
FBR has achieved more than 90 percent of its target
despite huge import compression.
The indicative targets
of refunds are related to retirement of refunds,
stocks and so far FBR has issued all determined
refunds of sales tax till September 2019. It is
a common practice that businesses claim huge refunds
but the authentication of these refunds usually
remains below 30 percent of claimed amounts due
to non-matching of invoice data. The IMF team
is in touch with Pakistan authorities on all issues
of program and is also providing technical assistance
to the Government on various aspects of the programs.
Last week a team of experts provided technical
assistance on expenditure side, next week a team
of experts on tax policy is visiting Islamabad.
The opinion expressed in editorial is probably
based on cursory reading of the staff level agreement
without going into the detailed qualitative benchmarks
agreed by the government and the IMF.
Rebuttal - Finance Division
rebuts news report regarding rate hikes, rupee
fall having serious social impact
response to an article, titled “Rate hikes,
rupee fall to have serious social impact”
published in Express Tribune dated September 16,
2019, it is to be noted that the writer has exaggerated
the cost of stabilization under the IMF program
while ignoring the anticipated positive impact
of the same.
Similarly, total subsidies
for fiscal year 2019-20 have been estimated at Rs
271billion which increased by 55.4% and 6.5% over
budget estimates and revised estimates respectively
of 2018-19. Out of which Rs 250 billion has been
allocated to WAPDA, PEPCO and KESC. Government has
withdrawn hike in gas prices for tandoors. In this
regard, government will give Rs 1.5 billion subsidy
to Sui Southern Gas Company Limited and Sui Northern
Gas Pipeline Limited. Going forward, IMF and government
has agreed to reassess the need for any additional
social spending to further reduce any impact on
marginal segments of the society.
The article suggests that increase in key policy
rate is aimed at attracting yield seekers and
to attract the so called “hot money”.
However the writer ignored to mention the key
reasons for increase in policy rate, which includes
build-up in excessive demand pressures in recent
years and associated increase in inflationary
expectations in the economy. This, together with
other administrative measures helped to discourage
the imports of non-essential items in order to
keep a check on otherwise widening trade deficit.
Although the rate hike may induce some “hot
money” to get into Pakistan as mentioned,
it is not to be used by any means as a strategy
for accumulating foreign reserves. This is evident
from recent increase in foreign exchange reserves,
which has been achieved primarily by reduction
in trade deficit.
Furthermore, the article also suggests that both
increase in policy rate and PKR depreciation impacted
the cost structure of the listed companies through
increasing their cost of raw materials. However,
the author didn’t consider the fact that
the government has provided a number of incentives
to industries. Indeed, in budget FY19-20, the
government has provided relief to export-oriented
sectors which can now import more than 1600 raw
material items at reduced/zero tariff rates. Additionally,
the SBP has kept the lending rates unchanged for
export oriented sectors under its Long-term finance
facility (LTFF) and Export Finance Scheme (EFS).
Over the short-to-medium-term, this would help
to reduce chronic woes of the external sector
through improving trade balance.
Furthermore, the author claims that the agreement
with the IMF may give rise to social crisis and
gave the example of Egypt in this regard. On the
contrary, IMF, in its recent country report, emphasized
the need to increase social safety net spending.
For example, a new Division of Poverty Alleviation
and Social Safety has been established to design
and implement social safety programmes in the
country. Under the head of Social Protection,
an amount of Rs 190.6 billion has been allocated
in the budget 2019-20 for welfare of the poor
segment of the society.The beneficiaries of Ehsaas
programme are extreme poor, orphans, widows, the
homeless, the differently abled, medically challenged,
and the jobless, who will be paid as per establish
terms of a National Socio-Economic Registry or
data bank based on poverty score card.
Rebuttal - Finance Division
rebuts news regarding IMF bar on sovereign guarantees
Ministry of Finance has contradicted a news report
published in a section of the press claiming that
IMF has barred Pakistan from extending sovereign
guarantees till December Review.
In a statement, Finance Division has termed the
report and its headline as false and contradictory
to an official response provided to the newspaper
in advance of the published report.
The Ministry has maintained that the concerned
reporter who has filed the story had approached
the Finance Division Spokesperson Mr. Omar Hamid
Khan with a question whatsapped to the latter
on why in the reporter's words the “Finance
Ministry is not extending the sovereign guarantees
against Rs 200bn loan to be borrowed from Islamic
banks to reduce the circular debt”.
In response, Finance Division Spokesperson Mr.
Omar Hamid Khan clearly told the reporter in a
written reply that “In order to ensure fiscal
discipline and debt sustainability, GOP has developed
a policy framework which has also been agreed
as part of the Extended Fund Facility provided
by IMF. Under this framework, GOP has decided
to set a ceiling (equal to 3.6% of GDP) on government
guaranteed debt. The framework is reviewed on
a quarterly basis in the light of progress already
made, prevailing economic circumstances, and the
overall objectives of achieving higher economic
growth and debt sustainability."
However, despite a clear response in no way indicating
that the IMF had in any way barred Pakistan from
extending sovereign gurrantees, the reporter went
ahead and falsely attributed the Finance Division
Spokesperson as having confirmed to him that the
IMF has barred Pakistan from extending sovereign
guarantees till December Review” which is
contrary to the facts as shared with him in a
written response by the Finance Division. “Such
an irresponsible reporting of even written words
and flashing them as headline is unethical and
against the spirit of healthy journalism and such
a tendency must be avoided to retain the trust
and credibility of readers and state institutions,”
said the statement.
Response - to some tickers run
on certain channels regarding arrangement of Rs
200 billion to bring down the circular debt
response to some tickers run on certain channels
regarding arrangement of Rs 200 billion to bring
down the circular debt, the Ministry of Finance
would like to clarify that it is considering various
options to complete the transaction as soon as
possible. Negotiations with banks are going on.
The matter has also been discussed with IMF team
during its recent visit. Hopefully the matter
will be resolved soon.
Rejoinder - to the News Item
published on 6th September 2019 regarding the
IMF Programme and Upcoming Staff Visit
certain news item published on 6th September 2019
has reported that the IMF is sending an SOS mission
to Pakistan owing to the fiscal outcomes of FY
2018-19. The news item has also claimed that programme
may be renegotiated.
It is clarified that both these assertions are
completely incorrect are not based on actual ground
The upcoming IMF Mission is
a staff level visit that had been planned much
earlier and it is absolutely erroneous to construe
that the IMF staff level mission is any kind of
The claim that the IMF programme
is being renegotiated is equally misconceived.
The Government of Pakistan remains firmly committed
to implement the policies and reforms spelled
out in the IMF-supported program. As indicated
in the program documents, the IMF-supported program
will be monitored and reviewed according to a
calendar of quarterly reviews. The first one is
scheduled to take place at some point in December. Our
understanding is that as part of our technical
work program, an IMF team will come on a routine
Staff Visit in mid September 16-20.
It must also be emphasised
that after the initial adjustments, the economy
is rapidly stabilising, in particular the external
sector, and that the current fiscal year will yield
some very positive economic outcomes.
Rebuttal - Pakistan rebuts Indian
Media reports on FATF
is with reference to the news published in Indian
media about Pakistan being black listed by APG.
It is clarified that APG in its 22nd Annual Meeting
held in Canberra, Australia from 18-23 August
2019 has adopted Pakistan’s 3rd Mutual Evaluation
Report and has put Pakistan in its enhanced follow-up
as per APG’s Third Round Mutual Evaluation
Procedures. In line with APG’s Third Round
Mutual Evaluation Procedures, Pakistan would be
required to submit follow-up progress reports
to APG on quarterly basis. It is further clarified
that the media reports being circulated about
Pakistan being blacklisted by APG are incorrect
Clarification - Reference News
item published in the newspaper titled "Pakistan's
external debt estimated at $130b by FY23"
is with reference to the news item published in
the newspaper “Express Tribune" titled
“Pakistan’s external debt estimated
at $130b by FY23” dated 10.07.2017. The
article’s commentary is based upon external
debt and liabilities and comments regarding external
public debt are as under:
The said report clearly
states that out of total External Debt and Liabilities
(EDL) the government borrowing will amount to USD
90 billion in FY 2022/23 from US$ 71.4 billion in
The news report used exaggerated statements and
drew baseless conclusions with the intention to
create sensation and mislead the general public.
The news item has quoted that as per International
Monetary Fund (IMF) External Debt is estimated
to reach US$ 130 billion by fiscal year 2022/23
with a net addition of $34.6 billion during the
tenure of the present Government from US$ 95.4
billion in FY2017/18.
The news is referring to External Debt and Liabilities
(EDL) of the country which includes private sector
debt, debt of banks etc. in addition to the external
public debt. Time and again it has been clarified
that EDL does not constitute borrowing of the
Government since it includes borrowing of PSEs,
liabilities of the central bank, borrowing of
banks and of the private sector.
Clarification - Ministry of
Finance issued a clarification
order to bring clarity about the budget and expenditure
figures for Prime Minister Office, Finance Division
presents following facts, with a view to address
certain misconceptions in Media
- During the Current Financial
Year 2018-19, PM Office had a budgetary allocation
of Rs. 986 million. However, owing to ongoing
austerity drive and with a view to set the example
from the top, PM Office has successfully managed
to squeeze its expenditures up to Rs. 675 million,
which is 32% reduction that is unprecedented.
- Further analysis reflects
that the expenditure of PM Office (Public) has
been curtailed from Rs. 514 million (budgeted)
to Rs. 305 million (actual till end June), thereby
reflecting the saving of 41%.
- Similarly, PM Office (Internal)
brought down its expenditures up to Rs. 370
million, against the budgetary allocation of
Rs. 472 million, which reflects the expenditure
squeeze of 22%.
- To achieve this goal of
expenditure rationalization and austerity, PM
Office slashed 35% HR and massively reduced
expenditure on refreshments, fuels, Procurement
of Equipments and Machinery and adoption of
a basic economical non lavish style of official
- The budgetary allocation
for PM Office (Public + Internal) for next financial
year 2019-20 is Rs. 862.9 million which is again
12% less than budgetary allocation for FY 2018-19.
In spite of rising inflation, increase in salaries
and demand for replacements of physical assets
and refurbishment etc, budgetary allocations
for PM Office have been kept to bare minimum
levels, to set an example for other Federal
Ministries / Divisions & Departments.
- For further clarity, it
is informed that the Printed Budget for PM Office
has been reflected in the Volume-I of Federal
Budget 2019-20 (Current Expenditure). The relevant
pages are 302-310.
- Electronic Media has
been flashing page 302 of this book which reflects
the PM Office Budget worth Rs. 1172 million
for financial year 2019-20 against the existing
budgetary allocation of Rs. 986 million for
FY. 2018-19. As elaborated in the table, the
PM Office budget of Rs. 1172 million also includes
the budgetary allocation (Rs. 309 million) for
National Disaster Management Authority (NDMA).
NDMA, although autonomous with its own budget
line has been parked under the PM Office. Previously
it was under the Ministry of Climate Change.
Hence, the budget of NDMA must not be and should
not be confused with the distinct budget items
of PM Office. Data table may be referred for
more clarity on this.
- For purpose of budget preparation,
revised budget estimates comprise of 8 months
actual expenditure plus 4 months anticipated
expenditures. The budget book page No. 302 reflects
revised estimate of Rs. 820 million against
the budget of Rs. 986 million for the PM Office.
However, PM office went through further belt
tightening and has successfully been able to
close the financial year at an actual expenditure
of approximately Rs. 675 million which is even
18% lesser than the revised expenditure estimates.
- The budgetary allocation
for PM Office for next financial year 2019-20
is approximately Rs. 863 million which is 12%
lesser than budget allocation for FY 2018-19.
This existing spending level of PM Office (Rs
675 million) is actually touching the expenditure
levels in FY 2014-15, which speaks volumes about
the austerity drive in the PM office.
In nutshell, Finance Division
clarifies that PM office has actually reduced
its expenditure by 32% during the CFY 2018-19.
Its next year budgetary allocation is 12% less
than the budget for 2018-19. The coordinated effort
to bring austerity through rationalization of
current federal expenditures would continue in
future under the high standards set by the PM
Office, based on the PM’s vision of cutting
the complete budget analysis of the Prime Minister
Prime Minister’s Office
Budget & Expenditure Analysis
Disaster Management Authority
Revised budget is estimated on eight months
actual expenditure+ 4 month anticipated
Estimated Actual is actual expenditure
during the year. It carries actual data
for eleven months
(up to 31-05-2019) + 1 month anticipated
Clarification - that the Federal
Government has neither reduced nor delayed the
transfer of funds to any of the provinces
of Finance, in response to various news reports
to this effect, clarifies that the Federal Government
has neither reduced nor delayed the transfer of
funds to any of the provinces. All the provinces
have been receiving their share in the Federal
Transfers in accordance with the NFC Award. The
Federal Government makes these transfers, fortnightly,
on the same day of reporting of the collections
by the collecting agencies (i.e. Federal Board
of Revenue and Petroleum Division). Any shortfall
in revenue collections results in a uniform change
in the share of the Federation and the provinces
in the Federal Transfers.
Similarly, Punjab and Khyber
Pakhtunkhwa have received Rs. 866.6 billion and
Rs. 290.4 billion, respectively, compared to Rs.
801.7 billion and Rs. 269.3 billion received during
the corresponding period last year that has resulted
in 8.1% and 7.9% increase in their Federal transfers.
Balochistan also saw a12.8% increase in its Federal
Transfers by receiving Rs. 180.3 billion compared
to Rs. 159.9 billion during the same corresponding
The Ministry further clarifies that the government
of Sindh has received Rs. 441.8 billion, as federal
transfers, during the first three quarters (July
– March 2018–19) of the current fiscal
year compared to Rs. 418.1 billion during the
corresponding period of the last fiscal year entailing
a 5.7% increase i.e. Rs. 23.7 billion higher than
the last year.
Clarification - Ministry of
Finance strongly refuted the impression created
by certain statements by representatives of Government
of Sindh that there is delay in transfer of resources
from the Federal Government to the Provinces
Ministry of Finance strongly refutes the impression
created by certain statements by representatives
of Government of Sindh that there is delay in
transfer of resources from the Federal Government
to the Provinces. It needs to be noted that FBR
reports revenue collection to Finance Division
twice a month (on 17th and last working day of
the month). The shares of the provinces are transferred
on the same date as per the NFC formula. No amounts
are withheld by Finance Division.
It seems that the claim
of shortfall is based on the assumption that revenue
collection is evenly spread during the 12 months
of the financial year, which is not the case. Historically
during the initial months of the financial year,
the collections remain on lower side compared to
the later part of the year with the highest collection
recorded in June of every financial year. The Federal
and Provincial fiscal authorities are aware of this
fact and plan their expenditures accordingly.
During the first 8 months of the current financial
year an amount of Rs.312.2 billion has been provided
to Sindh as part of its share in the collected
revenue. In addition an amount of Rs.57.5 billion
has been provided as arrears for the last year.
Overall, the Government of Sindh has received
Rs.27.1 billion more during the current financial
year (July 2018 - February 2019) compared to the
same period of last year.
Clarification - A report in
a section of media contends that Government has
borrowed Rs 2.9 trln in just 7 months to finance
report in a section of media contends that Government
has borrowed Rs 2.9 trln in just 7 months to finance
For sake of clarity it is important to comprehend
that the increase in debt stock cannot be termed
as borrowing of the government. The increase in
debt stock incorporates devaluation impact due
to depreciation of Pak Rupee against US Dollar
as well as impact of increase in credit balance
of the government with the banking system. In
this regard, following facts are worth noting:
- In US Dollar terms,
central government external debt increased from
US$ 64.1billion at end June 2018 to US$ 65.8
billion at end January 2019. Therefore, an increase
of around US$ 1.7 billion was recorded in central
government external debt during first seven
months of current fiscal year compared with
the increase of US$ 5.9 billion during the same
period last year. In rupee terms, central government
external debt amounting US$ 65.8 billion becomes
equivalent to Rs9,096 billion at an exchange
rate of PKR138.2553/US Dollar. Therefore, the
value of central government external debt has
increased by Rs 1,300 billion during first seven
months of current fiscal year (from Rs 7,796
billion at end June 2018to Rs 9,096 billion
at end January 2019). Here, it needs to be understood
that out of this increase of Rs 1,300 billion,
around Rs 1,100 billion or 85 percent is attributable
to depreciation of Pak Rupee against US Dollar.Hence
actual borrowing was significantly lower than
what is reported in the news report. It is also
worth noting that depreciation of Pak Rupee
increases the rupee value of external debt (reporting
loss), but does not add much to foreign currency
liability of the country during any particular
- Similarly, apart from domestic
financing of fiscal deficit, increase in credit
balances of the government with the banking
system has resulted in increase in domestic
In the light of above mentioned
facts, Ministry of Finance refutes the claim of
news report that federal government has borrowed
Rs 2.9 trillion in just seven months to finance
the budget deficit of the country. In fact, actual
borrowing for financing of budget deficit was
much lower and rest of the increase in public
debt can be explained through above mentioned
factors. In fact, news report contains self-contradictory
statements,as on one hand it states that Pakistan
recorded a budget deficit of one trillion rupees
during first six months of current fiscal year
while on other hand it states that government
borrowing for financing of fiscal deficit was
almost three times during first seven month of
current fiscal year.
There is also a need to understand
that present government inherited many challenges
on domestic and external front which forced it
to borrow to meet its social and development goals.
Particularly, Public Debt to GDP ratio was 72.5
percent at end June 2018 as against threshold
of 60 percent as stipulated under FRDL Act while
Federal Fiscal Deficit (excluding foreign grants)
was 6.5 percent during 2017-18 against the threshold
of 4 percent. Resultantly, existing debt obligations
contracted by the previous governments consumed
around 37 percent of government revenues during
2017-18. Since major chunk of revenue is consumed
by debt servicing, additional borrowing is required
to meet other current and development expenditure. Similarly,
on external front, increase in imports pushed
the current account deficit to a historic level
of around USD 19 billion during 2017-18, which
exerted pressure on foreign exchange reserves
as well as on exchange rate which depreciated
by around 32 percent during last one and half
year. This has not only contributed towards fueling
the inflation but has also increased the stock
of external public debt significantly.
Given, this prevalent economic
situation, a multipronged strategy is being pursued
with focus to substantially increase tax revenues
and country’s foreign exchange earnings. At
the same time, reducing unnecessary expenditures
with curtailment of losses of public sector enterprises
is also being pursued to bring down the deficit.
Government has also taken initiatives to expedite
institutional reform and promote austerity to reduce
non-development and non-productive spending. All
these measures are expected to reduce the debt burden
of the country in the medium term.
Rejoinder - Federal government's
borrowing from the State Bank of Pakistan (SBP)
hit a high of Rs 6.6 trillion
opinion piece in a section of print media on 27th
January said the federal government’s borrowing
from the State Bank of Pakistan (SBP) hit a high
of Rs 6.6 trillion. It adds that the government
has been borrowing at an average of Rs 15 billion
a day for the past five months, that the budget
deficit will hit a high mark and huge losses in
PSEs. The opinion piece needs clarification on
certain accounts to present the true point of
view based on data and factual actions undertaken
by the Government over the last several months.
Based on preliminary estimates,
Government borrowing from SBP during July-December,
2018 was at Rs 1.2 trillion. Figures reported
in the article at Rs 6.6 trillion is not correct
and misleading. It is also important to note that
due anticipation of increase in interest policy
rate borrowing from scheduled banks was in negative
at Rs (-) Rs 702 billion. A net bank borrowing
during July- December, 2018 was Rs 496 billion.
However, in the light of stability in the policy
interest rate scheduled Banks have started a reasonable
participation in government security auctions.
It is projected that increased borrowing
from banks will substitute in lowering borrowing
from SBP in the coming months.
There is a need to understand
the difference between increase in debt stock
and actual borrowing of the government. The writer
has been quoting a highly misleading number of
Rs 15 billion a day for the past five months.
He misquoted increase in debt stock as borrowing
of the government i.e. devaluation impact due
to depreciation of Pak Rupee against US Dollar
has contributed significantly towards increase
in debt stock of the government during first five
months of current fiscal year. In fact, this devaluation
impact was more than actual borrowing of the government.
The writer has appreciated
the measures announced by the Government in the
investment and promotion package of January 2019
in consultation with all the major stakeholders.
This package has been announced to ease the cost
of doing business in Pakistan, reverse the trends
of de-industrialisation and support exports. All
this is intended for job creation and enlarged
social sector production for reducing poverty
in the country.
The writer has correctly highlighted
that the tax incentives announced in the Package
would help to ‘direct additional credit
towards three important sectors of the economy:
small and medium-sized enterprises (SMEs), the
agricultural sector, and the low-income housing
The writer is correct that
the measures ‘will encourage savings, investments
and, at the same time, compress the demand for
imported luxury items’.
The reforms package announced
by the Government is a continuation of the measures
already announced earlier, like reduction in electricity
and gas prices. The package is also focussed on
reducing external imbalance, a legacy of ineffective
policies of the last decade.
The Government has initiated
measures on austerity, reducing tax evasion and
monetary and exchange rate measures. The shortfall
of Rs 170bn in FBR tax collection in first six
months of FY19 is primarily due to reduction in
GST on petroleum products to shield domestic consumers
from rising international oil prices.
The measures to shield domestic
consumers and especially the poorest and most
vulnerable households have started to yield results
and CPI inflation has declined for two consecutive
months to 6.2% in December 2018, down from 6.8%
in October 2018. More importantly, food price
inflation has declined to just 0.9% in December
2018, compared to 3.3% in August, when the PTI
government came to office. In the coming days
further measures will be taken to provide relief
to the poorest and most vulnerable households.
The most critical challenge
facing the new government was to avert a balance
of payment crisis. Due to tireless efforts of
the Government, success has been achieved with
significant investment and financial assistance
from bilateral partners including Saudi Arabia,
UAE and China. The Government has finalised a
facility of trade finance for oil with the ITFC.
Facility for oil on deferred payment has been
finalised with Saudi Arabia and shall be operationalised
soon. This will help improve Balance of Payments
in the country.
These measures have started
to restore confidence. Credit Default Swaps (CDS)
has declined in January, making Pakistan US$ bonds
the best performing bonds in the Emerging Asia
markets. Similarly, the high participation in
the PIB auction on 23rd January with a bid over
Rs 344bn, shows improving sentiment locally, which
will help reduce reliance on SBP borrowing This,
will help government reduce reliance on SBP for
deficit financing, a risk highlighted by the writer.
Prudent monetary policy stance
by the State Bank of Pakistan is ensuring that
inflation remains well anchored. The effect of
such a policy is to protect the common man. At
the same time, securing enough food supplies in
the country has ensured that food inflation remains
at the lowest. Expenditure management has been
such where aggregate demand in the country has
been managed to arrest the rising inflation and
its effect on the current account.
It is a misplaced contention
that the budget deficit, which is projected at
5.6%, will grow to 10%. The budgetary deficit
is being very much managed by ensuring that the
target of overall revenues including FBR and non-tax
revenue for the year are met. The quasi-fiscal
losses are being handled. The Government
has already taken key measure to reduce the build-up
of circular debt and the focus has not only been
towards rationalization of prices but the plan
of reducing losses, past recovery and a host of
efficiency measures which are already in place
and are showing results.
Growth maybe subdued in the
immediate but will be broad based and financed
through raising domestic savings and investment.
Evidence for the first 6 month shows that the
private sector in Pakistan both for working capital
and for fixed investment has domestically borrowed
around Rs 500 billion compared to Rs 230 billion
in the first 6 months last year and the agriculture
sector credit has shown a growth of 22% in the
first 6 months. Therefore, the allegation that
economic growth is dropping does not appear to
be based on evidence that is presented in the
first 6 months.
The statement that expenditure
is out of control is also not correct. Expenditure
growth is very much in control. Pakistanis are
not being burdened by any amount that is being
said by the author. Total provisional expenditure
for first six months of current FY were
marginally higher on account of interest payment,
security and other spending. Interest payments
during the year 2018-19 would be higher owing
to increase in interest rates and exchange rate.
In the budget total interest payments (on domestic
& foreign debt) was estimated at Rs 1.6 trillion
which is expected to increase from this amount
but not as much as contended by the writer. For
other expenditures the present government has
abolish all discretionary allocations of the President
and the Prime Minister. Further a 10% cut has
been imposed on current expenditure. However,
no cut has been imposed on security related expenditure.
The numbers quoted by the
writer of losses in PSEs, energy and commodity sectors
are highly exaggerated and misleading. It is reiterated
that the Government has already taken targeted steps
to appoint Heads in all key organizations on merit.
In PSEs such as, PIA, banks and SECP, this has already
been done to strengthen the overall governance and
cut these losses. The energy sector has seen a reduction
in the bleeding and a target has been set to bring
the circular debt flow to almost close to zero,
in the next 12 months. The writer’s contentions
are all based on conjectures rather than any solid
evidence and to the contrary, the remedial steps
are very much underway to protect the assets of
the people of Pakistan.
Comment - on news report appeared
in Dawn on 20th January 2019
response to a news report in Dawn on 20th January:
"FBR fails to recover Rs 170 bn in fraud
cases", it is stated that the Directorate
General of Intelligence and Investigation of Inland
Revenue is FBRs premier anti tax fraud agency. It
undertakes surveillance activities and after getting
verification from the record it prepares a contravention
report which is sent to field formations ( LTUs
& RTOs) for adjudication and recoveries.
The field formations examine
the record and issue notices to taxpayers for
their response. In almost 90% of the cases adjudication
is quite close to contravention report however
in few cases the explanation of taxpayer is found
correct and the issue is dropped after consulting
the Intelligence Directorate. In most of the cases,
the taxpayers opts to approach the high courts
to delay the impending demands. Because of these
issues average time of finalization of such cases
varies between one to four years.
The I&I reports are a continuous
feature of working of FBR and the number of cases
and the associated revenues keep on changing on
month to month basis.
The progress in all such cases
is closely monitored by FBR at the very highest
level and it's very difficult for any lower functionary
to misuse this information.
Moreover any complaint regarding
any compromise on I&I cases are very seriously
viewed by the Chairman and FBR has zero tolerance
for any such compromise.
Rebuttal - Position on transfers
made to Sindh
of Finance strongly refutes news reports/statement
which claim that the Federal Government has made
less transfers to Sindh during the current financial
It is evident that the transfers
in both absolute and percentage terms have increased.
It is further clarified that the Federal Government
immediately transfers the share of all the Provinces
as per the NFC formula, based on the revenue collection
reported by the FBR.
It is clarified that during the first half of
FY 2017-18, FBR reported a collection of Rs.1845.3
billion (inclusive of arrears of previous year).
During the same period of current financial year,
FBR reported collection of Taxes as Rs.2,011.4
billion (inclusive of arrears of previous year).
The share transferred to Sindh province during
the same period of last financial year was Rs.251.5
billion and during the current financial year
it is Rs.275.2 billion showing a growth of 9.4%.
Response - Claim on Pakistan's
international reserves dismissed as misleading
Ministry of Finance dismisses as misleading, the
claim appearing in a section of the press on 6th
January 2019 that Pakistan’s international
reserves are at the lowest point ever in recent
Any argument regarding international
reserves position cannot be grounded merely on
‘net international reserves’ position.
Instruments such as forward swaps and balance
of payment support are used by central banks and
governments all over the world to strengthen their
international reserves position.
The truth is that at present
SBP reserves are standing at USD 7.1 billion (as
on 3rd January 2019), whereas SBP reserves were
as low as USD 2.8 billion on 7th February 2014.
The Government of Pakistan has arranged enhanced
flows for balance of payments support on bilateral
and multilateral basis, which will further strengthen
the country’s international reserves position.
Response - to News Report about
APG's visit to Pakistan
news report published today in a section of press
on Pakistan’s FATF and APG issues is
not based on facts.
It may be noted that Pakistan
is passing through two separate processes, one
is FATF Action Plan and another is regular assessment
of AML/CFT regime.
The FATF Action Plan has been
agreed with FATF and is being implemented with timelines
from Jan-2019 till September 2019. Its progress
is being monitored by FATF on quarterly basis.
The focus of this action plan is on the implementation
of TF regime in Pakistan.
The regular APG assessment
is part of Pakistan’s APG membership requirements and
every country in the globe is required to undergo
assessment of anti-money laundering and combating
the financing of terrorism (AML/CFT) framework.
is being conducted by APG and assessment team
from China, Turkey, UK, USA, Indonesia and
Maldives. The purpose of the assessment is
to gauge the level of compliance on key AML/CFT
areas including adequacy and effectiveness
of laws, policies and coordination, implementation
of preventive measures, powers and capacity
of FMU, supervisory and law enforcement agencies,
use of financial intelligence and international
cooperation. During the onsite visit (8-19
October 2018) to Pakistan, the APG assessment
team held meetings with all Pakistan’s
AML/CFT stakeholders. This process will culminate in
July 2019 in APG’s annual meeting and in
between draft reports would be exchanged
with APG including one face to face meeting in
April 2019. Both processes i.e. FATF Action
Plan and APG’s mutual evaluation are distinct
and may not be mixed while reporting in press.
It is pertinent to mention
that all countries undergo regular mutual evaluation process
using a global assessment methodology and procedures.
As of date the AML/CFT assessments of 60
countries have been completed across the globe
out of which 16 countries are the members
of APG. It is the third mutual evaluation of Pakistan
the first two were held in 2004 and 2009 respectively.
It is also clarified that APG
assessment team headed by APG’s Executive Secretary
Mr. Gordon Hook held a courtesy meeting with Finance
Minister and discussed Pakistan’s overall
AML/CFT regime. The Finance Minister during the meeting
with APG team assured Pakistan’s strong
commitment for a robust AML/CFT regime as
per international standards and highlighted Pakistan’s measures
on this front. The APG team also did not share
any assessment in written or verbal forms
whether Pakistan will continue to remain on FATF
Gray list or not.
No other issues were discussed
with the Finance Minister by APG delegation except
the above for which a press release was also issued
by the Ministry of Finance on 17th October