Inefficient public sector bodies heavy burden on economy: Shah
By Khaleeq Kiani
ISLAMABAD, June 10: Pakistan’s economy has become a hostage to inefficient public sector organisations like power utilities and the Pakistan International Airlines, which eat up billions of rupees every year, Prime Minister’s Adviser on Finance Dr Salman Shah said at a press conference here on Sunday.
Dr Shah said that system losses of the Karachi Electric Supply Corporation (KESC) and the Water and Power Development Authority (Wapda) — at 45 per cent and 25 per cent, respectively — were consuming billions of rupees every year. These losses needed to be brought down to 10 to 12 per cent, the international benchmark, through `tough reforms’, he said.
“Public sector corporations, having consumed over Rs400 billion in six years, represent the largest non-productive burden on the national budget. The government has allocated over Rs98 billion in subsidies for public sector corporations in addition to an average Rs70 billion per annum injection over the past five years,” he said.
“We are hostage to such white elephants. They have eaten up billions of rupees, which otherwise could have been used for opening up new schools, universities and health facilities,” he said.
“The performance of such institutions is totally unacceptable,” hence they need to be transformed in three to four years provided the nation cooperated.
He said the PIA was making huge losses because of its old fleet and aircraft known as “gas guzzlers”. Unless its fleet is modernised and made efficient, it would continue to undermine the economy, he said.
In reply to a question about kickbacks in PIA deals, he said: “Corruption is a curse in Pakistan.” The disclosure clause in all deals made it an international crime an envisaged recovery of the kickback amount both from the giver and taker.
The budget 2007-08, he said, had focused on four key issues that included investment promotion, sustaining economic growth, creating employment opportunities, improving social conditions and strengthening physical infrastructure to achieve strategic twin objectives of sharing benefits of the economic growth with the entire population and winning the war of global competitiveness.
“The only way of sustaining a constant economic growth is that the entire population should be able to participate in the development process and get its benefits and compete with globalisation, which is unavoidable.”
Dr Shah said that 15 per cent increase in salaries and pensions would put an additional burden of Rs33 billion, if provincial governments followed the federal decision.
The additional burden on the federal government would be of Rs10 billion on account of increase in salaries and Rs3.5 billion owing to increase in pensions.
Finance Secretary Tanvir Ali Agha said that the 15 per cent increase would be calculated on the basis of running salaries but its details would be worked out later.
He said the 15 per cent increase in pension would apply to those who had retired after July 1, 1997, and those having retired before that, would be entitled to 20 per cent increase.
Central Board of Revenue Chairman Abdullah Yousuf said that the total impact of new taxation measures would be about Rs44 billion. The CBR, he said, would lose about Rs10 billion in concessions, thus leaving a net revenue gain of Rs34 billion.
Dr Shah said that a lot of negative politics had been going on over the issue of the National Finance Commission (NFC) and all provinces were involved in the matter, adding that the provincial leaderships believed that they would face a political backlash if they reached an agreement and resolved the issue.
He did not agree with a questioner that the NFC award was imposed by the president and the provinces still deemed it unconstitutional and illegal, and said the “NFC award is 100 per cent constitutional and better than the previous one.”
When asked if the economic targets could still be achieved given the worsening political situation in the country, the adviser said some protesting political quarters were trying to derail the national economy, but the people would not allow these forces to disrupt economic growth and development.
The adviser explained that the total size of the federal consolidated expenditure had been estimated at almost Rs1.875 trillion that included expenditure at the federal level, besides provincial and district expenditures because the fiscal deficit was always calculated on a consolidated basis.
Against this expenditure, the consolidated revenue for the next fiscal year has been projected at Rs1.476 trillion, leaving a deficit of almost Rs399 billion.
He said the deficit would be met through Rs197 billion external borrowing, Rs130 billion domestic borrowing and Rs72 billion Pakistan Investment Bonds (PIBs).
He shrugged off criticism on use of public money for political objectives in an election year, and said that food and salary related relief was very important for the people and increase in minimum wages would be a regular feature in all future budgets because the government wanted the country to be known as a decent wage country, instead of the minimum wage country.
