ISLAMABAD: Finance Minister Dr Abdul Hafeez Shaikh on Wednesday admitted that the economy was in the doldrums -- the foreign direct investment dropped to less than $2 billion from over $5 billion in four years, while the banks’ bad loans increased by more than 100 per cent in five years.
Dr Shaikh in written answers to the National Assembly also admitted mismanagements in the affairs of the state-owned National Bank, while adding that the government was printing huge amount of currency notes to run its affairs.
The total foreign direct investment had continuously been declining since the incumbent government came in power, and the finance minister informed the National Assembly that the FDI and the portfolio investment in 2007-08 was $5.45 billion, dropped to $1.91 billion in 2010-11.
Responding to a question about the value of currency notes printed during the tenure of the government, the finance minister said currency notes worth Rs201 billion were printed in 2007-08 which jacked up by 100 at Rs439 billion in 2008-09.
However, under severe pressure from the IMF that the government has to reduce borrowings from the central bank and the printing of currency notes dropped to Rs154 billion, but with the requirement to run its affairs the government borrowing rose more than 100 per cent in 2010-11 when currency notes worth Rs373 billion were printed.
While, the critics said that high government borrowing was adding fuel to inflationary trends, Finance Minister Dr Hafeez Shaikh denies that printing of currency notes directly impacts inflation. However, he said that it results in increased circulation of currency.
“The prime reason for this increase in currency is heavy government borrowings from State Bank for budgetary support,” Dr Shaikh said.
The minister also said that the government borrowing from State Bank had shown some respite during the last few months.
“This is expected to help in restraining the printing of new notes and slowing down growth in money supply,” Dr Shaikh said.
While, the country is faced with bleak economic situation the finance minister acknowledged that 42 officers had been promoted out of turn in 2009 and 2010 in the National Bank of Pakistan, the largest bank of the country.
The promotions include 14 Assistant Vice Presidents to Vice Presidents, while 27 Officer Grade-I employees have been promoted to AVP.
Besides the National Assembly was informed that the volumes of bad loans were on the rise and loans written off by the banks and financial institutions in 2010 was Rs10.07 billion compared to Rs6.38 billion in 2009.
The finance minister informed that the aggregate figures of non-performing loans (NPL) of the banking sector by the end of 2010 reached Rs464.85 billion.
The finance minister blamed the economic downturn, rising borrowing cost and global economic recession as the main reasons for surging NPLs.
Dr Shaikh also said that the repayment capacity of the borrowers had been hit due to reduction in industrial production because of shortage of electricity, gas and poor law and order situation.
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