ISLAMABAD: With a Rs5 billion additional fiscal burden arising out of the withdrawal of the recent increase in oil prices, the government on Thursday pulled off a soft corner from the parliamentary parties to take steps for economic stabilisation through further expenditure cuts and revenue enhancement.
According to sources, the government borrowing from the State Bank, which stood at about Rs120 billion at the end of September, had been brought down to about Rs85 billion by Dec 31. This was achieved through a tight fiscal policy that involved much reduced releases for various ministries and divisions than the first three months of the fiscal year, not only for current expenses but also for the development programme.
An official who attended Thursday’s meeting of parliamentary party leaders, presided over by Prime Minister Yousuf Raza Gilani, said the parliamentarians were informed that the government would have to achieve the limit of net zero borrowing from the central bank in the remaining six months of the year under mandatory international obligations.
This cannot be achieved without curtailing the development programme and current expenditure that was going out of hand because of higher than anticipated security spending and badly managed public sector entities, the sources said.
The economic managers sought support of the prime minister and parliamentary groups, including the opposition, to help draw a course of action in this regard.
The economic team painted a bleak picture of the national economy in the wake of tight monetary and macroeconomic conditions and told the parliamentary leaders that the government was currently in an economic stabilisation mode that required further expenditure cuts and more revenue generation.
A source hinted at cutting down the Public Sector Development Programme to a paltry Rs125 billion — lowest in over a decade since the Nawaz Sharif government in the late 1990s. The federal PSDP already stands curtailed from a budgetary estimate of about Rs300 billion to Rs185 billion, putting a ban on new projects and concentrating on projects that can be completed during the current fiscal year.
The parliamentary leaders agreed to consult more parliamentarians as a formalised advisory forum to suggest an economic roadmap, but said the government would have to reduce oil prices.
They said the reduced oil prices would remain in place until Jan 31, but before then the parliamentary forum would put in place a mechanism to suggest benchmarks for absorbing fluctuation in international prices up to a limit without putting too much burden on consumers.
By that time, the exchequer would face a revenue loss of Rs5 billion for providing oil products to consumers at rates prevailing before the recent increase, the officials said.