KARACHI, Aug 10: Minister for Finance Shaukat Aziz on Saturday said that foreign exchange reserves have touched $7.1 billion, and the current account is surplus for the last several months, which ensures country’s economic security.

Addressing members of All Pakistan Textile Mills Association (Aptma) at a luncheon meeting at APTMA House the minister said, “soon we will be touching our new foreign exchange reserve target of $8 billion which will further consolidate the position.”

Shaukat Aziz said high reserves have direct bearing on input cost of industry because in the past when reserves were only around one billion dollars there used to be rapid depreciation of the rupee value against dollar.

As a result of this, he said, the exchange rate used to affect the cost of imported goods directly, including POL products whose import bill is highest and also have direct implication on the cost of electricity particularly when generation of energy through hydel is lesser due to shortage of water.

The minister said that government is very much concerned about the rising input cost of industry but due to circumstances beyond its control things would remain the same for another couple of years.

Another reason for high cost of power tariff, Shaukat Aziz said, is the high prices of power supplied by IPPs but by year 2005 it will be over as per agreement with the government. Shaukat Aziz said next year Ghazi Brotha hydel power of 1200 mw will come into operation and provide a lot of relief.

Furthermore, he said new gas field of Zamzama will provide fresh supply of gas for power generation and that should also assist in bringing down energy prices.

On the banking side the minister said there had been three major issues — bringing interest rate in single digit, lowering of inflation rate and bringing some efficiency in banking system.

He said now many a industrial group is getting finances from banks on a single digit interest rate and this was only possible when “we managed to clean portfolios of government owned banks and injected fresh funds.” Shaukat stressed the need for privatizing more banks that would make further cut in interest rates possible.

The minister advised APTMA to lobby for privatization of banks because this will help improve efficiency and also lower interest rates. He said compared to last year the average interest rates is lesser by 2 per cent this year at an average rate of 12 per cent and this is also market driven.

Similarly, he said the NSS interest rates have been linked to market mechanism and so is the export refinance rates. This will ensure lesser or no involvement of government in business affairs.

The minister looked quite confident when he said that large scale manufacturing has shown 9 per cent growth during March-May 2002, as it indicates that manufacturing is picking up. He said during July to September of fiscal 2001-02 the LSM grew by 5.3 per cent but in October to February it grew by 1.5 per cent only.

A total investment of $1 billion was made in the country last year out of this 60 per cent was in textile industry, that is why export also went up and it is a good omen, the minister added.

He repeatedly asked the textile tycoon present on the occasion to ensure that farmer must get fair return for this product (cotton), and added if the grower survives the industry survives.

Shaukat Aziz brushed aside that there was any move to fiddle with tariffs and said the government will not intervene or bring change in free cotton trade policy, which is going on for the last couple of years. “You can freely import and export cotton and there is no restriction of any sort,” he maintained.

Talking about the SECP, the minister said it is doing better than those in the West where presently there are a lot of corporate scandals. He said it is encouraging that SEC is also looking into forward market in cotton and added even uncontrolled hedge trading leads to lot of problems.

Referring to market access, he said the government is doing a lot and has directly linked it with politics and diplomacy. He also briefly talked about SRO417, SRO439, and sales tax refunds and informed the participants that CBR is using IT for revenue collection.