Complete updated details placed on Ministry s website. Pakistan would have continued to pay 4% over KIBOR if circular debt was not paid on time

Transcription

1 CIRCULAR DEBT Complete updated details placed on Ministry s website Pakistan would have continued to pay 4% over KIBOR if circular debt was not paid on time Stakes of foreign governments were involved PIBs were floated at an average of 10% instead of KIBOR + 4% To arrest re-emergence of circular debt:- o A provision of Rs 220 billion subsidy has been made in the budget which is being paid as per schedule (Rs 101 billion paid todate) o Outstanding amount is payable by provinces o Institution of Federal Adjustor is being re-activated in consultation with provinces which will ease the situation Addition of 1,700 MW in the national grid has shown positive results which can be seen from the latest large scale / small scale manufacturing growth results which was 0.5% last year and is now 7% IMF PROGRAM Following IMF documents are placed on Ministry s website: o Memorandum on Economic and Financial Policies for 2013/ /16 (MEFP) o Technical Memorandum of Understanding (TMU) Received $ 7.9 billion from IMF and paid $ 4.8 billion leaving a balance of $ 3.1 billion as of end June 2013

2 Choices / options (i) default / Paris Club (ii) new Program Program negotiated with IMF primarily to repay old loans New program has not added to the present debt burden; inflows less than the outflows One purpose was to send a signal to international markets that our economic programme had international recognition Government targeted for unfavourable terms that would stem growth, devalue rupee, increase electricity tariff, increase foreign exchange reserves by securing expensive loans, increase inflation and unemployment, discourage savings and exports; this is unfounded / baseless IMF negotiations conducted in the most professional manner and competently with consultation with all stakeholders Positive response from IFIs and banks OPIC and IFC have tripled their allocations/credit lines for Pakistan Issue of adjustment of rupee dollar parity was not even discussed with IMF Standard & Poor s and Moody s have given a positive outlook on Pakistan after a long time Overseas International Chambers of Commerce, which conducts regular surveys on business confidence, has raised its index for Pakistan from a (-) 34 to (+) 2 Goldman Sachs has projected Pakistan as one of the 11 emerging economies of the world First quarter review by IMF very satisfactory Apart from one, all other benchmarks achieved We are on track and expect that IMF Board will approve $ 525 million on 19 December

3 QUARTERLY NATIONAL ACCOUNTS Quarterly National Accounts (QNA) for Pakistan prepared and presented for the first time QNA adopts the same principles and definitions as the Annual National Accounts (ANA) Constraints of time, resources and data availability are more in QNA QNA will be consistent with ANA and pattern of finalization will be the same for both accounts GDP for the 1 st quarter has shown growth by 5.0% Release calendar of QNA will be: Quarter 1 Quarter 2 Quarter 3 / 4 / annual 1 st of January 1 st of April May First quarter QNA being released ahead of calendar ANA re-based in , and Policy decision in PBS Governing Council meeting to re-base every ten years Next re-basing will be in

4 TABLE: GDP (constant) Growth Rates of Q1 for the year Sector / Change (%) over Annual Target Industry corresponding quarter of growth rates previous year Q / Q Q / Q Agriculture Industry Services Total FISCAL POSITION (30 NOVEMBER 2013) FBR revenue: Rs 792 billion (up to Nov 2013) - Rs 679 billion (up to Nov 2012); Growth - 17% Releases against PSDP Rs 143 billion Budget deficit 2.2% equal to Rs 570 billion compared to 2.9% equal to Rs 690 billion (last year) FOREIGN EXCHANGE RESERVES Foreign exchange reserves falling on account of overall negative inflows Foreign exchange will improve from now onwards due to:-

5 o Short term BOP support borrowings ($ 225 million / $ 100 million received) o IDB support (Euros 750 million / Euro 200 million received: $ 133 million + $ 137 million) o IFC trade financing facility ($ 500 million to rise to $ 1 billion); Global rupee bond o Euro Bond $ 500 million (FA appointment shortly) o Diaspora remittance-based Bond (FA appointment will follow Euro Bond launch) o Fast-track of capital-market-based disinvestment of government shares o $ 1.6 billion World Bank and ADB policy loans o $ 798 million CSF (Sep-Dec 2012: $ 381 million / Jan-Mar 2013: $ 417 million) o $ 800 million Etisalat o Between $ 1.2 and $ 2 billion spectrum auction Remittances US $ 6.4 billion in July November 2013 against $ 5.9 billion in corresponding period of 2012; growth 7% - on target EXCHANGE RATE Non-availability of dollar currency notes and speculative activities in the market were reasons behind dollar volatility Exchange rate has improved to Rs (interbank) and Rs (kerb) as at a.m today

6 INFLATION (caretaker summaries) Starting causes: Opening tariff / 0.75% GDP revenue / International oil prices / Revenue shortfall in (Rs 2,381 billion) / achieved Rs 1,936 billion / circular debt Rs 503 billion Increase in power, oil and food prices led to inflation Inflation is a cause of concern; average CPI for the first 5 months 8.8% which was 8.4% in the previous corresponding period Core inflation excluding food and energy has been continuously declining As per latest SPI for the period 12 th December 2013 prices of 16 essential items increased whereas prices of 13 items decreased and 24 items remained unchanged out of total 53 SPI items Tomato price has declined by 21.76%, potatoes by 12.74% and onions by 5.85% Sugar price at Utility Stores Corporation has been reduced by Rs 5 per kg and DAP price has been reduced from Rs 4,000/- per bag last year to Rs 3,500/- per bag this year PRINTING OF NOTES Issuance Deposit Net issuance Rs 672 billion Rs 466 billion Rs 206 billion Net issuance of notes in July November 2012 : Rs 205 billion

7 PRIVATIZATION Chairman of Privatization Board has been appointed Board of the Privatization Commission is being finalized Efforts are underway to disinvest shares of certain banks and PSEs in the stock market Privatization (e.g PIA, Pakistan Steel Mill) is being carried out transparently as part of PML (N) manifesto Preferred option is strategic partner with 26% shares and handing over of management TAX COLLECTION AND TAX AMNESTY FBR revenues Rs 792 billion as compared to Rs 679 billion last year; growth of 17% Non-filers of tax returns to avail concession by 28 February 2014 Dormant NTN holders to avail concession by 28 February 2014 For investment scheme, commercial operation date has been fixed on or before June 2016 to avail incentives under the PM package for industrial growth COMMITTEE ON PROMOTION OF ISLAMIC BANKING Steering Committee for promotion of Islamic Banking notified Committee will review previous reports, formulate comprehensive policy framework for Islamic Financial System, suggest practical steps to implement Shariah-based financial system etc First meeting held today

8 AUSTERITY MEASURES CONTINUE Discretionary funds for Prime Minister and Ministers discontinued 30% cut in expenditure except pay and allowances saving of Rs 40 billion Working of foreign missions reviewed and non-productive components beings closed down leading to annual saving of Rs 2 billion Fee/remuneration for government nominated directors in PSEs has been capped at Rs 600,000/- per annum. Amount over and above will be deposited into government treasury STOCK MARKET On 11 th May 2013 KSE index was 19,916 which rose to 25,679 today at 11 a.m meaning a growth of 28.93% On 11 th May 2013 market capitalization in rupee terms was Rs 5.27 trillion which rose to 6.16 trillion on 9 th December 2013 meaning a growth of 22.1% On 11 th May 2013 market capitalization in dollar terms was $ 50.0 billion which rose to $ 57.0 billion on 9 th December 2013 meaning a growth of 11.1% INCORPORATION OF COMPANIES 17% increase in July November 2013 compared with July November ,000 dormant companies have r-activated since July 2013

9 GRANT OF GSP PLUS STATUS GSP+ granted by European Union Will increase exports to EU by $ billion per annum ROADMAP / MEDIUM TERM PROJECTIONS GDP growth to gradually rise to around 7% Investment/GDP to rise to 20% Fiscal deficit to be brought down to 4% of GDP Pakistan s foreign exchange reserves to be increased to around $ 20 billion, and Public debt to be reduced to below 60% of GDP ********** Economy was adrift, broken, on brink of collapse:- o The growth rate had averaged less than 3% in the last five years, which is significantly below our potential; o The inflation had averaged around 13%, which is unprecedented in the last four decades; o Foreign Exchange Reserves were initially around $ 18.2 billion but $ 11 billion were left behind despite having obtained significant support from IMF;

10 o There was a circular debt of more than Rs 500 billion which was crippling the power sector; o The average deficit in the last five years was recorded at about 7%, which is unprecedented in country s recent history; o The public debt stood at Rs 5,602 billion on 31 st March 2008 rose to Rs 14,366 billion by 30 th June, 2013, implying a 2.5 times increase in country s indebtedness. Even on the basis of Debt to GDP comparison the ratio rose from 52.6% of GDP to 62.7% representing an increase of nearly 10 percentage points in country s debt burden Budget presented in a very short time Completed six months in office