February 08, 2008	Friday	Muharram 29, 1429

ISLAMABAD, Feb 7: The government is considering curtailing current expenditure, increasing sales tax rates and raising energy prices to bridge the rising fiscal deficit, which now stands almost 70 per cent higher than the budgeted target.

Caretaker Finance Minister Dr Salman Shah said on Thursday the fiscal deficit had gone up to 2.5 per cent of the GDP, which was well above the fiscal target of 1.7 per cent. Therefore, he said, the gap would be bridged by increasing the energy prices by the next government.

Talking to journalists here at a function organised by Infrastructure Project Development Facility (IPDF) in collaboration with the Infrastructure Management Unit (IMU) of the Planning Commission (PC), he said some proposals were also under consideration to increase the sales tax rates but no decision had been taken in this regard. He did not elaborate.

He said the government would also curtail current expenditure to keep the fiscal deficit within manageable limits during the second half of the current fiscal.

The minister said that the government was finalising a package to provide some financial assistance to the people living below poverty line in urban areas but there was hardly the government could do in reducing ghee and cooking oil prices as palm oil prices have more than doubled to $900 per ton from $400 per ton.

This is a huge increase and the government is not in a position to subsidise the two kitchen items, he said.

He said that government was evaluating the areas, which would be provided water from Mirani and Sabakzai dams for cultivation of oilseed crops like sunflower and soyabean, etc. “This will help the government to increase the oilseed crops production in the country.”

Speaking at the IPDF workshop Mr Shah said Pakistan direly needed a number of infrastructure development projects through the public-private partnership to accelerate economic development in the country. “The development needs at least 10 per cent of GDP allocations that meant a hefty $16-20 billion per annum and since the budget does not have so much of flexibility, the public private partnership (PPP) was the best solution forward.

The workshop had been arranged to introduce PPP concepts to the senior federal and provincial government officials. IPDF’s Chief Executive Officer Aijaz Ahmed briefed the participants about the annuity-based PPPs and told them about some of the features of the recently announced public private partnerships policy of the country.

He said that under annuity-based PPP (rather than the public sector procuring) managed the capital asset and provided a public service and as a result the private sector creates the asset through a dedicated standalone business and then delivers the service to the consumers in return for payment from the public sector institution that is linked to performance.

The PPP modality of developing infrastructure and then delivering services to the consumers, permits the public sector to reduce its capital expenditure and convert the infrastructure development costs into affordable operating expenditure spread over time, he added.

Member Implementation and Monitoring of the Planning Commission Lt. Gen (Retd) Muhammad Zubair said the decline in public sector investment in infrastructure, as a percentage of GDP, in the 1990s, has resulted in creating a huge backlog and high maintenance costs of the infrastructure. Efforts to attract private investment, in particular, in power and telecom sector, have shown that these investments can be realised and can contribute to meet funding gaps in infrastructure, he added.