Salman’s note of caution for new govt: Immediate relief for people to cause economic instability
By Ihtasham ul Haque
ISLAMABAD, March 17: The Ministry of Finance has warned the incoming government of serious economic instability if it takes any substantive measure to provide immediate relief to the people, ignoring the constantly increasing oil prices.
“The new government must avoid indulging in rhetoric to offer any relief package. This could only be possible when the international oil prices come down to $85-90 a barrel,” the caretaker Finance Minister Dr Salman Shah told Dawn on Monday.
He said Pakistan’s economic difficulties would continue to intensify because of upward revision in international oil prices every now and then.
“The Ministry of Finance is in contact with the incoming government and has told its important players not to bring down prices artificially as it will create distortion in the economy,” he said.
A detailed brief, he pointed out, had been prepared by his ministry on the state of the economy which would be presented to the new government with particular reference to oil prices, budget deficit, trade deficit, foreign investment and privatisation.
Dr Shah said that in case international oil prices continued to remain around $105-$110 a barrel, it would cause ‘serious economic instability’ and the new government would have to find a solution besides increasing petroleum prices regularly till June 30 this year.
“Caretakers could perhaps announce this increase only two times and now the incoming government will have to look after this problem which is turning serious with the passage of every day,” he said.
He regretted that the previous government did not listen to the advice of its economic mangers to increase oil prices during the past 13 months due to elections.
He also said that the new government would have to reduce the fiscal deficit with new resource mobilisation and by increasing its revenue.
Responding to a question, Dr Shah said that the electricity tariff had been increased by 9 per cent and needed to be raised further. However, he said that in case the incoming government succeeded in improving power efficiency by 20 per cent, the power crisis could be tackled to some extent.
“Then the incoming government will have to ensure exchange rate stability and provide level playing field to investors,” he said, adding that new rulers must strive hard to achieve $10-12 billion foreign direct investment (FDI) this year ($8 billion in 2006-07).
Similarly, foreign remittances will have to be increased to $8 billion plus ($6 billion last year) by providing incentives to overseas Pakistanis.
In reply to another question, he said that without increasing the GDP growth no real relief could be provided to the common man. He advised the new government to provide subsidised essential food items to seven million families.
