ISLAMABAD: Highlighting serious issues relating to current account and fiscal deficit, caretaker Finance Minister Dr Shamshad Akhtar on Tuesday said the interim government had no mandate to sign any new agreement or start negotiations with the International Monetary Fund (IMF) for a bailout package, stressing that any decision to that effect should be taken by the upcoming elected government.
She also said that market forces should decide the value of dollar, especially when key factors such as import-export parity and inflow of remittances were not healthy.
“If we maintain exchange rate stabilisation for a long time, it is not sustainable,” Dr Akhtar said while addressing a press conference along with Minister for Information Barrister Ali Zafar.
She said fiscal deficit had reached 6.1 per cent of GDP, but did not specify the figures at the close of the fiscal year on June 30. “The issue is that revenue targets should not be too optimistic; in fact it has to be less optimistic so that fiscal deficit ends closer to the targeted figure,” she said.
The finance minister acknowledged that external debt repayment was a serious challenge in the short-term but in the absence of any IMF programme the interim government would seek other options.
She presented a bleak picture of the country’s economy and said there would be an upward trend in inflation following Monday’s hike in the prices of petroleum products.
She said the increase was due last month, but the previous government had left it to the interim set-up. She said there had been an increase of six to 11.5pc in the Arab oil basket, but the government had passed only 50pc of the increase to the consumers and would take the impact of Rs9 billion in June.
The finance minister said public debt, which was 64.7pc of GDP in 2013, rose to 70pc by the end of previous government’s tenure, deploring that it was not consistent with federal debt limitations.
She said public sector entities were a problem, stressing the need for structural reforms to overcome these losses.
Barrister Zafar, who is also Minister for Energy, said the previous government had focused heavily on enhancing the electricity generation capacity but given less attention to upgrade transmission and distribution systems. “The system has chocked due to heavy demand.”
He said that a detailed presentation on power sector had been prepared and it would be forwarded to all political parties as a guideline for future planning.
“The severe weather has increased the electricity demand and there is need for long-term planning in this regard, as not much has been done to improve transmission and distribution systems and no dam has been built in 40 years. Water utilisation has to be modernised,” he added.
He said that currently electricity generation was around 22,000MW against the demand of 24,000MW.
Published in Dawn, June 13th, 2018