ISLAMABAD: The caretaker federal ministers’ press conference on Friday was a delicate balance of hope and forewarning as they referred to minuscule “signs of economic recovery” but warned of a hike in gas tariff and the revision of federal and provincial development programmes to create additional fiscal space.
Addressing a joint press conference with Power and Petroleum Muhammad Ali and Information and Broadcasting Murtaza Solangi, Minister for Finance Dr Shamshad Akhtar said the caretaker government had inherited a set of challenges but didn’t shy away from addressing them one by one prudently by controlling expenditures and improving revenues.
“This is the way forward for gradual improvement. There are some signs of economic recovery, even if just starting”, she said and mentioned the consumer price index (CPI) declining from 38pc in May to 27.3pc last month.
“We have come out of some difficulties and price stability will improve as we go forward.”
Shamshad says CPI dip, cement sales uptick signs of recovery
Secondly, the productive sectors have shown improvement, she said while referring to the agriculture sector and hoped that the yield of major or minor crops would improve this year, thus increasing growth prospects.
Some people were complaining about difficulties in the industrial sector, but the data “showed improvement”, the minister added as she pointed towards the increased sales of cement and other items.
As per data released by All Pakistan Cement Manufacturers Association earlier this month, domestic sales of cement increased by 37 per cent to 6.573 million tonnes during the first two months (July to August) of the current fiscal year, compared to 4.8m tonnes in the same period last year.
“The services sector is very vibrant at this stage,” said the minister, adding the government was now working in coordination with the Special Investment Facilitation Council to improve foreign direct investment.
Gas tariff rationalisation
Mr Ali, the minister for power and petroleum, painted a bleak picture of the gas sector burdened by an “unsustainable” circular debt as he built a case for gas tariff hike.
The power sector’s circular debt stood at Rs2.5 trillion and that of the gas sector at Rs2.9tr because there was not much development in the sector in the last 10 to 15 years, and the government could not bridge this Rs5.4tr gap.
The government was trying to reduce the financial burden on consumers, but the circular debt was “too big to be absorbed by the government without impacting people”.
Under the proposed plan for gas tariff rationalisation, the rates would go up for all consumers. Around 60pc of consumers in cities would see a hike of Rs200 to 400 per unit, while rich consumers would pay the maximum price, the minister said.
The government wanted to promote the gas industry, but there was no justification for the price gap that ranged between Rs1,700 to 3,700 per unit for SNGPL consumers and Rs1,100 to 1700 per unit for industrial consumers of SSGCL.
He said the government was selling gas at Rs1,100 per unit on average after importing it at $12.5 (Rs3,700), which was unsustainable.
The entire price regime needed to be reformed, said Mr Ali, adding the government would do its best to at least maintain the gas management mechanism of last winter, if not improve it.
Responding to a question, Dr Akhtar said the proposed tariff hike was not due to any new condition put forward by the IMF.
PSDP to be revised
While calling public sector spending “a big issue,” Ms Akhtar said several challenges had arisen since the devolution of powers to the provinces as federal responsibilities continued to increase.
There was no discrimination in the disbursement of funds to provinces, while the public sector spending required review under the IMF programme to create some primary surplus, said the minister.
She elaborated that the assumption of primary budget surplus — the difference between total revenues and expenditures, except interest payments — at 0.4pc of GDP or about Rs380bn in the previous budget was “based on weak calculations”.
The finance ministry was reviewing federal and provincial development plans and the matter will be taken up with provincial finance ministers for the PSDP restructuring. She hinted at an “across the board cut” in provincial PSDPs “because the heat of the IMF programme has not reached the provinces so far”.
Published in Dawn, September 16th, 2023