ISLAMABAD: Despite clarification from the Finance Ministry about the World Bank’s recent report, the Senate Standing Committee on Finance and Revenue has asked the Finance Ministry to brief the House about the current and exact state of the national economy.
In its report, the World Bank had pointed out increased vulnerability of external account and risk to macroeconomic stability given the widening current account deficit. The report projected gross external financing needs of Pakistan at 9 percent of the GDP i.e. $31 billion for the fiscal year 2018. The gross financing requirements have been worked out by taking into account the portfolio investment of 4 percent of GDP i.e $13.8 billion. The report has further projected deterioration of the external sector in current fiscal year.
In response to the report, the Finance Ministry stated that Pakistan’s gross financing need for 2017-18 was about $18 billion (5.3 percent of GDP) rather than $31 billion (9 percent of GDP). It further said that report was based on misinterpretation of standard definition of the gross financing needs of the country. The report was also a misstatement of performance of external account for the two months of current fiscal year. As per the international reporting standards, portfolio investment is not included while calculating the gross financing needs of a country.
As per international standards, a country’s gross financing need is an aggregate of current account deficit plus debt servicing of the year. Based on this standard, Pakistan’s gross financing need for 2017-18 is about $18 billion (5.3 percent of GDP) rather than $31 billion (9 percent of GDP) as mentioned in the said report. As of Sept.2017, the total portfolio investment is $6.6 billion. i.e. 1.94 percent of GDP rather than $13.8 billion (4 percent of GDP). Again it is a misstatement of facts.
However, declaring Finance Ministry’s claims insufficient Senate Committee to put this issue on the agenda for the next meeting and asked the Finance Ministry to brief about the economic situation of the country.
Committee met here with Senator Saleem Mandviwala in the chair and was told by officials from finance division that the programme of loans / budgetary support has not been suspended by the World Bank for Pakistan as reported in press.
Chairman Committee observed that it has been attributed as a statement of World Bank that programme has been suspended owing to deteriorating macroeconomic indicators. The Committee directed that if it is not true the finance division should present as substantial evidence from the World Bank.
It was told by the petroleum division that update on the summary sent to cabinet regarding settlement of GIDC with the CNG sector as recommended by the committee will be given in the same month.
Regarding the issue of payments made to clear the circular debt of power sector amounting to Rs 480 billion during the year 2013, the committee expressed serious apprehensions on the reply submitted to the committee as it was contrary to the commitment made by power division in the previous meeting.
The report stated that the directives of the committee cannot be implemented because it is in contrary to the principles of good governance and transparency without stating any particular reasons for not implementing the recommendations clause by clause.
The committee asked the officials present to clearly state whether they agree to implement the directions or not. If latter is the case the ministry should give good reasons for not being able to do so. The Committee decided to take briefing on the matter from minister and secretary in the next meeting so that it can be decided that the matter has to be sent to FIA or NAB or some other entity.
