Pakistan Finance minister Ishaq Dar said the government would reduce the budget deficit by 2.5 per cent in the forthcoming year to 6.3 per cent and to four per cent within three years, after a shortfall of 8.8 per cent between 2012 and 2013.
He said the government will not go for any more borrowing in this fiscal year. The government yesterday launched the Pakistan Private Investment Initiative with an initial equity of $48 million (Dh176.5 million), scalable up to $500 million.
“To accelerate the growth [of the private sector], we have to provide the resources, and the only possibility of that are a reduction of public debt,” the minister said during the second US-Pakistan business opportunities conference in Dubai yesterday.
Dar said GDP growth in the previous fiscal year was 3.6 per cent compared to a target of four per cent. The government is targeting a growth of 4.4 per cent in the coming fiscal year.
The government is increasing its public sector development programme budget from Rs360 billion in the outgoing fiscal year to Rs540 billion, Dar said.
He also said that the government is focused on tackling the poverty issue in Pakistan. Over 50 per cent of the population is below the poverty line.
They have a comprehensive plan to clear $5 billion equivalent of circular debt, which relates to the private sector.
“We plan to eliminate this old and serious problem of Pakistan [energy shortage] in 60 days, and the preference will be given first to private sector debt, would be cleared hopefully in the next couple of weeks, and the public sector debt will be settled within July.”
The finance minister said the country has a small tax base and it needs to be rectified. Less than a million Pakistanis pay income taxes, a big chunk of government revenue is used up subsidising a power sector that covers just over half the country’s needs.
The rupee, meanwhile, has lost almost 40 per cent of its value against the dollar since the last election in 2008.
Sagging exports and debt repayments have nearly halved official currency reserves over the past year to $6.5 billion in late May. That is just enough to cover five weeks of imports.
The Asian Development Bank (ADB) estimates that about $500 million flows out of Pakistan every month, meaning that it may not have enough to meet about $5 billion in loan repayments due this year and next.
— With inputs from agencies