Tuesday, June 16, 2009

.:: SAMAA - Govt won’t delay funding: Khar

.:: SAMAA - Govt won’t delay funding: Khar

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This fiscal year the government will definitely distribute development funding on time, assured state finance minister Hina Rabbani Khar Tuesday while acknowledging this was not done last year.

“Literally, resources were so tight [last year], no development spending was possible,” Khar explained on SAMAA’s Pakistan Aaj Raat programme with Ihtesham-ul Haq who questioned her on the new federal budget she presented on June 13. “At least now we are talking about economic revival.”

That revival has been slow in the making since October 2008 when the currency had devalued, there was a run on the banks, and economically Pakistan was at a low point. “People had lost confidence,” she said, adding that no government wants to turn to the IMF, but unfortunately it is a “lender of last resort”. “But stabilisation wasn’t possible without that,” she stressed.

Most of all, the province of Balochistan suffered because of the shortage in development funds, she acknowledged but said that all the money it was owed from the last fiscal year had been carried forward.

This budget includes the highest ever allocation for development – Rs 646 billion to make up for last year. The Public Sector Development Programme has been split into Rs 421 billion for federal projects and Rs 200 billion for the provinces, to be spent through their Annual Development Programmes.


In order to keep working on stabilization, Khar said the budget had set aside 40 billion rupees for its investment support fund. This was essentially to target exports and thus mainly applied to textiles. A minister had gone up to her after the budget speech and complained that she had not mentioned this sector at all. She clarified, however, that she had repeatedly referred to manufacturing and industry and in fact this time a good textile policy had been prepared. “One major thing that has been done is that we have decided to bring energy costs down instead of subsidizing textiles,” she said.


Ihtesham-ul Haq questioned her on the new carbon surcharge on petroleum products that would be imposed from July 1.

“I will be highly unpopular right now,” she said with a smile, before going on to explain the reason why the government has put a carbon tax in addition to GST.

The gas supply for Pakistan has to be rationed because we are short on it. For four months of the year, half of industry comes to a grinding halt because of the gas shortage and contract employees go unemployed. “You have to decide whether you want gas on your streets or in your factories and power houses,” she said, while explaining why it will be more expensive. The ministry and power houses need 335 MCFD but have been getting only 100 MCFD which is why they are forced to close or use furnace oil. “When you have a resource shortage, you have to prioritize,” she said.


Khar was extremely candid when asked about the likelihood of foreign investment given the current fight against extremism. “It would be very unrealistic to say that Foreign Direct Investment will come,” she said while describing the possibility as “not very positive”.

“Pakistan is in the news every day for suicide bombings,” she said. “But we must recognize that bold decisions need to be taken. No one has Aladdin’s lamp to say what will happen.” And there were areas where investment was still being made even though people were spreading panic by saying investors wouldn’t even come to Pakistan for meetings and preferred Dubai.

She felt it was sad that Pakistanis were tolerating such high levels of violence that has been affecting the economy so badly – a war economy for all intents and purposes. “No other country has such a high acceptance for wrong, such a soft corner,” she said, adding that Pakistanis still manage to rationalize violence by saying its perpetrators must have some reason.

Nonetheless, she assured that the government was trying to bring back confidence and if industry output or growth goes from a -4 percent to 2 percent, that would still be an improvement.


The rich landholders should be taxed, argued Khar when questioned on the agriculture tax.

“I am not talking about the hari who has barely 25 acres and one tractor,” she said, clarifying that the agriculture tax could not be applied to such poor people. “We’re talking about the rich ones with say, more than 20 morabas… [But we know that] we have to first increase farmer income,” she stressed.

Khar’s stance was rejected by former minister Sartaj Aziz, who felt that an agriculture tax was not a federal government matter. “This is something for the local bodies… they will be able to assess it better,” Aziz said over the phone during the programme. “[But for it to become a federal government matter] you would need a constitutional amendment.” When asked if people were ready for something like this, Aziz replied that he didn’t think so. “Far more important constitutional amendments haven’t come through… how would this one?”

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