Prime Minister's Policy Package
Raza, Moosi, Economic Review
Prime Minister in his speech made no mention about the defaulted loans which stood around Rs.125 billion and the meaningful imposition of agricultural tax. He emphatically ruled out the possibility of slashing defence budget. Government intends to save money from the administrative head where 12 per cent is being spent. How much government would be able to save from it is yet to be seen.
Prime Minister Nawaz Sharif in his policy package has assured giant strides to bail the country out from its worst economic crisis. He launched a campaign "retire debt and save Pakistan" to rid the country of foreign debt and suggested different methods in this regard. Reduction in non-development expenditure, no escalation in petrol or utility prices, full protection to foreign investment and incentives for workers are some other priorities Prime Minister listed to fulfil. Government servants from Scale 1-16 have been provided relief of Rs.300/- per month from March 1, and a 10 per cent rise to Pensioners has also been given. Discretionary quota and fund allocation for development to legislators have been abolished. Minister will retain one car only and the green channel has been re-opened with a ban on the import of luxury items. Sunday has been declared as weekly off. Official guards from the residences of high-ups along with protocol facilities has been removed. No Flag will be hoisted on cars of ministers with some exemptions. Ban on medical treatment abroad on official expenditure that was terminated during caretakers government will continue.
Prime Ministers while depicting the economic scenario as gloomy informed that with only three months to go, a fiscal deficit of Rs.20 billion is on his shoulders. He also mentioned a widening trade gap of $3.6 billion, the exports totalling $8.3 billion lagging behind a huge imports bills $11.9 billion and if balance of payments deficit is taken into account, the shortfall comes to $4.4 billion. According to Prime Minister despite devaluation of rupee by 50 per cent the exports could not rise and the industrial growth graph reached Its lowest ebb during the tenure of Benazir government. He further disclosed that the balance of payments became adverse and in October, 1996 foreign reserves had been left at a bare half a billion dollars and the performance of agricultural sector particularly the wheat and cotton crops was below average as such sugar, onion, potatoes etc. had to be imported.
Nawaz Sharif took over the charge at a juncture when Pakistan's economy is in shambles. Inflation is touching unprecedented heights for last couple of years. The official estimates put to 13.5 per cent whereas the independent economists account it as high as over 20 per cent. The current economic indicators suggest that the target set by IMF are unlikely to be met because of the gloomy economic scenario. The depleted foreign exchange reserves stand around 700 million dollars. IMF has set an annual ceiling of bank borrowing at Rs.70 billion. But it has gone over Rs.56 billion in seven months of the current year whereas it should have been Rs.53 billion. Similar is the position of revenue collection. The machinery has failed and a shortfall of Rs.35 billion is expected.
Enhancement of salaries of Government employees from Grade 1 to 16 and a 10 percent rise to pensioners will cost billions of rupees that would further swell the depleted national exchequer. It would have to be fulfilled through printing more currency which in result would increase inflation in the country. The decision to increase salaries and not pushing up utility prices was not appreciated by IMF. In case Pakistan fails to stand to IMF conditionalities it could face the downgrading by international rating agencies which could hamper the inflow of foreign investment in the country and damage economic credibility of the country.
Prime Minister in his speech made no mention about the defaulted loans which stood around Rs. …