presentation by finance minister of pakistan to the prime minister of pakistan 2014 januray

8/13/2019 Presentation by Finance Minister of pakistan to the Prime Minister of Pakistan 2014 Januray

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STATE OF ECONOMY

Presentation to Honourable PrimeMinister, Cabinet Members and Media

By

Minister for Finance, Revenue, EconomicAffairs, Statistics and Privatization

0

1st

January 2014


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SEQUENCE

OF

PRESENTATION1 Where we stood

a we ave onea. Budgetb. Austerity measuresc. Settlement of circular debt

d. IMF Program

f. Financing of energy projectsg. Prime Ministers new initiatives

. n a oni. Transparencyj. Islamic Banking

1


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SEQUENCE

OF

PRESENTATION3 Where we stand nowa. Incorporation of companies

b. Stock market performancec. Fiscal positiond. Filin of tax returns

e. Foreign remittances

f. Exchange rate.

4 Where we are heading

2


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WHERE

WE

STOOD

3


5/63

WHERE

WE

STOOD(INJUNE2013)

o Growthrate

averaged

less

than

3%

in

the

lastfive earssi nificantl belowour

potential

o Inflationaveraged

around

12%

o ForeignExchange ReservesatUS$11 billion

inJune2013despitesignificantsupport

o CirculardebtofRs503 billionwascrippling

4


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WHERE

WE

STOOD(INJUNE2013)

continuouslyand

had

reached

12.6%

Tax GDPratiohaddeclinedto8.5%

Fiscaldeficitof201213wastocloseat

8.8% DebttoGDPratiohasincreasedinlastfive

yearsfrom52.6%ofGDPto62.7%

o Rs2.94trillionon30th June1999th

5

o

Rs

14.36

trillion

on

30

th

June

2013


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6


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BUDGET

PrimeMinistertookoathon5June2013

Governmentformedon7June2013

Budgetpresentedon12June2013

Fiscaldeficittargettedat6.3%for201314as

against8.2%

(with

provincial

surplus,

8.0%)

for

7

201213


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AUSTERITYMEASURES

Secretserviceexpendituresof32Ministries/

AutonomousBodiesceasedexceptISIandIB

DiscretionaryfundsforPrimeMinisterand

40%cutinPrimeMinisterOfficeand30%cut

inall

Ministries

/Divisions

current

8

savingof

around

Rs

40

billion


10/63

AUSTERITYMEASURES

Workingofforeignmissionsreviewedand

beingrightsizedleadingtoannualsavingsof

Rs2billion

directedallMinistries/Divisionstoreviewfor

rationalizin their stren ths for the ur ose of

rightsizing

Fee/remunerationforgovernmentnominated

directorsin

PSEs

capped

at

Rs

600,000/

per

annum.Amountoverandabovewillbe

9

epos e n ogovernmen reasury


11/63

AUSTERITYMEASURES

DutyfreeimportofluxurycarsforVVIPs

thatwas

banned

through

Budget

/Trade

dutyfree

import

of

cars

to

VVIPs

was

againallowedin200506.

However,the

old

ban

has

been

re

10

June2013


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CIRCULARDEBTNONPAYMENTHADRESULTEDINTO

SovereignguaranteesofGoPwerecalled/

nvo e

NineIPPs

had

gone

to

Supreme

Court

against

Interestcostforeachdayofdelay@14%(4%

+KIBOR)

amounting

to

Rs

67

billion

per

year

Foreigngovernmentswereagitatingdueto

nonpaymenttotheirnationalswhohad

s ares

sta esin

IPPs

Approximately1,700MWofpowerwasnot

12

Almostnil

industrial

growth


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CIRCULARDEBTSETTLEMENTOFCIRCULARDEBT

Governmentdecided

to

pay

in

60

days

as

perannouncementinannualbudgeton

12June2013

Circulardebt

was

cleared

in

less

than

45

days

Completeupdateddetailsofsettlement

placedon

Finance

Ministrys

website

(www.finance.gov.pk)

13


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ISSUANCEOFCURRENCYNOTES

surrender

1st Jul 30th

November

2013

Rs672billion Rs466billion Rs206billion

1st July 30th

November

Rs 614 billion Rs 408 billion Rs206billion

2012

14


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CIRCULARDEBT

BENEFITSOFSETTLEMENT

Increasedinvestors

confidence

Massivereductioninloadsheddingin

commercialanddomesticsector.Inthelast2

months

it

was

virtually

zero.

However,

due

ocana c osurean ec ne n y e

generation,someloadsheddinghasbecome

AgreementoffourIPPsforconversionfromfurnaceoiltocoalbasedwithin24months

16

wouldleadtosavingsandlowercostof

electricitygeneration


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CIRCULARDEBT

FINANCIALGAINTOTHECOUNTRY

circulardebt

was

not aid

billion

.

borneonPakistan

Investment Bonds

billion

.

(PIBs)

Annualnetgain/ Rs54.4billion

17

savings


19/63

CIRCULARDEBT

REEMERGENCEOFCIRCULARDEBT

Toarrestitsreemergence:

o ProvisionofRs220billionsubsidymadein

o Rs101billionpaidtodate

today

o Reportedoutstandingamountisdueto

nonpayment

primarily

by

provinces

and

privateconsumers

18

o ns u ono e era us or e ngre

activatedin

consultation

with

provinces


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IMFPROGRAM

ForeignexchangereservesofUS$18.2

on nc u ng . onrece ve

underStandB Arran ementof2008

fromIMF)hadfallentoUS$11billion

whenPML(N)Governmentwasswornin

u

,

u

y

US$3.1billionwasstill a abletoIMF

19


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IMFPROGRAM

ExtendedFundFacility(EFF)ofUS$6.64billion

negotiatedin

September

2013

ore gnexc angereserves a ngonaccount

ofoverall

negative

inflows,

thereby

resulting

indeclineofforexreservesofUS$11billion

une

o

.

ecem er

20


22/63

IMFPROGRAM

WhywechoseIMF:

o Aswas enerall redictedinternationall that

Pakistan

will

go

in

default

by

early

2014,

one

optionwastodeclaredefaultandgotoParisClub.

developmentpartnersi.eWB,ADB,IDB,OPIC,IFC,

JICAand

others,

would

have

dealt

with

Pakistan

resultingintonofinancingofdevelopment

projectslikeDasu,Jamshoro,NeelumJhelum,

transmissionlines KarachiCircularRailwa

motorways,energy

etc

o Asanhonourablecountry,wedecidedtohonour

21


23/63

IMFPROGRAM Newprogramshallnotaddtothepresentpublic

debtburden

n ows . on esst ant eout ows

(US$3.1

billion)

during

current

financial

year

moneytopayoffinstallmentsofolddebts

whichhad

become

due

Majorpurposewasalsotosendasignalto

internationalcommunitythatPakistanasa

honouritspastinternationalcommitments,

undertheleadershi ofPrimeMinisterNawaz

22

Sharif


24/63

IMFPROGRAM

Current ro ramismainl homedriven,

emanating

from

PML(N)

Manifesto

on

the

basisofwhichGeneralElections2013were

contested

FollowingIMFdocumentswereplacedon

(www.finance.gov.pk) on4th Sep2013

o Memorandum on Economic and FinancialPoliciesfor2013/14 2015/16(MEFP)

o TechnicalMemorandumofUnderstanding23

(TMU)


25/63

IMFPROGRAM

Havin seenourbud etar measures

andeconomic

reforms,

positive

signals

forthecountr are:

o ReengagementofWorldBank/ADB/

IDB/JICA

and

others

o OverseasPrivateInvestment

Corporation(OPIC)andInternational

FinanceCorporation

(IFC)

have

tripled

theirallocations/creditlinesforPakistan

24


26/63

IMFPROGRAM

Stan ar & P r ha iv n a ta l

outlookon

Pakistan

o OverseasInternationalChambersof

ommercera se ts n ex or a stan

from 34to + 2

25


27/63

PLANFORBUILDINGFOREIGNEXCHANGE

RESERVESIN

CALENDAR

YEAR

2014

World Bank IDA-16 US$ 1 billion

Asian Development Bank US$ 400 million

ommerc a an s

(US$ 525 m - rcvd US$ 100 m)

m on

Islamic Develo ment Bank US 730 million

( 750 m rcvd 200 m)

Global Rupee bond / IFC US$ 1 billion

26


28/63

Contd/2

Euro Bond floatation US$ 1 billion

Remittance-based bondfloatation

US$ 1 billion

Shares disinvestment through

stock market

US$ 1 billion

Etisalat (pending for 7 years) US$ 800 million

uc on o spec rum cences(March 2014) (Up to US$ 2

. on

27


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Contd/3

Recovery of pending

US$ 1.54 billion

Oct 12 Mar 13: US$ 798 malread billed

Apr 13- Sep 13 - US$ 750 m

(billin in rocess)

TOTAL (Planned additions)

during 2014

US$ 10.095 billion

Notes:

1.Aboveplannedfinancingitemsmaybereplacedorsubstitutedbysomeother

alternatives

28

2.ExpectedincreaseinexportearningsthroughGSPPlusstatusbyEuropeanUnionof

US$

1.5

billion

is

not

included

in

above


30/63

FOREXRESERVESPROJECTIONS

Reserves as on 1stJanuary US$ 8.406 billion

Add : Planned additions US$ 10.095 billion

during calendar year 2014

Less : Pro ecte current

account deficit

US 2.480 on

Net Projected Reserves as on

31st December 2014

US$ 16.021 billion

29


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PROJECT&TRADEFINANCE

FACILITIES(INPROGRESS) -

Hydel)

Asian Development Bank US$ 900 million

- .

30


32/63

Contd/2

.

ii. US$ 1.5 billion (for 3ears

Saudi Fund for

Development (SFD)

US$ 125 million

JICAs indicative financing

for KCR PMs meetin with

US$ 2 billion

Low cost 40 ears with 10

Japanese PM at NY,followed by FMs meeting

year moratorium)

31

with Japanese Dy PM / FM

in October 2013)


33/63

Contd/3

investors

billion to US$ 3 billion

OPIC country line for

private investors

Enhanced from US$ 500

million to US$ 1.5 billion

32


34/63

FINANCINGSTATUSOFENERGY

PROJECTSRe-activation of Nandipur project Additional 425 MW

(already done) (525 MW if on gas)

K2-K3 projects (Rs 6 billion out of 2,117 MW

Jamshoro coal power project (US$

900 m approved by ADB)

1,320 MW

CASA-1000 (US$ 200 m

Pakistans share already arranged)

1,000 MW

Wind power (Financed by OPIC

and private sector)

500 MW approx

33

Energy park at Gadani (under

implementation by MoW&P)

6,600 MW


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Contd/2

Dasu hydropower project (WB 4,600 MW

financing of US$ 700 m in progress)

Diamer-Bhasha dam (with 8 MAF 4,500 MW

indigenous resources)

Accelerated work on Neelum-Jhelum 969 MWpower project (financing in place)

Current generation 14,000 MW

approxTOTAL 36,131 MW

a rox

34

Note:Inadditiontoabove,Bunjihydropowerproject(understudy)

7,100MW


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PRIMEMINISTERSNEWTAX

INCENTIVES

Nonfilers

of

tax

returns

as

well

as

dormant

NTN

holderstoavailconcessionby28February2014

Forinvestment

scheme,

commercial

operation

datefixedonorbefore30th June2016toavail

ncen ves

un er

e

pac age

or

n us r a

growth

35


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PRIMEMINISTERSYOUTHPROGRAMSTATUS

OF

SCHEMES

ANNOUNCED

IN

BUDGET

ON

12

JUNE2013

PMs

Fee

Reimbursement

Scheme

for

Less

DevelopedAreasImplemented

s out us ness oans Underimplementation

PMsScheme

for

Provision

of

Laptops Approved

by

ECNEC

on

31st Dec2013

PMsInterestFreeLoansScheme Inprogress

PMsYouth

Training

Scheme In

progress

36

s ou s eve opmen c eme nprogress


38/63

INFLATION

Mainreasons:

domesticPOL

prices

(subsidy

approved

by

PM

forfirst7monthstill31st Jan14amountstoRs

17.6billion)

II. Non

payment

of

circular

debt

of

Rs

503

billionIII. Revenues ort a n 1 13

Budgeted: Rs2,381billion

,

Shortfall:

Rs

435billion

IV. Profiteerin andhoardin

37


39/63

CARETAKERSUMMARIES

V. Summarytoincreaseelectricitytariff:

o For15

months,

despite

NEPRA

awards,

therewasnoincreaseduetopolitical

o Caretakersdecidedtoincreasethe

electricitytariff

38


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CARETAKERSUMMARIES

SummaryforPMonrationalizationof

w r tariff :

1 Ma 2 1 m v M W&P

o 16May2013 endorsementby

Financeo 17May2013 approvalbycaretaker

PM

Decisiona rovedb PMwithheld

39

andnotimplemented


41/63

CARETAKERSUMMARIES

.

,

.

40


42/63

CARETAKERSUMMARIES

SummaryforPMcontaining20

proposa so regar ng ax revenue

measures:

o 16May2013 MovedbyFinance

o ay pprova ycare a ero 23May2013 Presidentdeferredthe

ec s on

an

re urne

e

summary

41


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44/63

INFLATIONTREND

Coreinflationexcludingfoodandenergycurrently

declinin .SPIalsofallin inlast5weeks

eek ended on SPI

Percentagechangeoverpreviousweek

07/11/2013 1.20

13/11/2013 0.4621/11/2013 0.95

28/11/2013 -0.54

- .

12/12/2013 -0.82

-

43

26/12/2013 -0.22


45/63

DECLININGPRICESEXAMPLES

Commodity Peak Price / kg Price / kg % change

(with dates) (on 26th Dec 2013)

Tomatoes 122

(7th

Nov 2013)

42 -65.87

Onions 607th Nov 2013

39 -35.19

Potatoes 71 32 -54.3

44

(21st Nov 2013)


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WE BELIEVE IN TRANSPARENCY


47/63

WEBELIEVEINTRANSPARENCY

PML(N)Governmentpostedalldetailsofthe

thenIMFProgramonwebsitein199899

CurrentIMFPro ram laced rom tl on

FinanceMinistryswebsiteon4Sep2013 the

dayitwasapproved

Fulldetailsofrecipientsandsourcesof

financingrelatedtosettlementofcirculardebt

46

placedonFinanceMinistryswebsite



48/63


PakistanBureauofStatistics(PBS)hasbeen

madeautonomous

Tillrecentl NationalAccountswere re ared

annually

Toprovideinformationonregularbasis,

NationalAccountswillnowbeprepared

quarterly

47



49/63


uarterl NationalAccountsfor1st uarter

endingon30th September2013were

released

on

11th

December

2013

Quarterlyaccountsfor2nd quarterending

on31st December2013willbepresented

48by

31st

March

2014



50/63


Rebasingwaspreviouslydoneatdifferent

intervals

198081,19992000and200506

PolicydecisioninPBSGoverningCouncil

Nextrebasingwillbein201516andthenin

49

202526

ISLAMIC BANKING


51/63

ISLAMICBANKING

WorldIslamicBankingmarketcurrently

tan at S 1.6 trilli n

SteeringCommittee

for

promotion

of

I lamic Bankin f rm

Committeewillreviewpreviousreports,

formulatecom rehensive

olic

frameworkforIslamicFinancialSystem,

su est racticalste stoim lement

Shariahbased

financial

system

etc

Firstmeetin heldon19December2013

50

ReportexpectedbyendDecember2014


52/63

51

INCORPORATION OF


53/63

INCORPORATIONOF

COMPANIES

Incorporationofnewcompanieshas

November2013

as

compared

same

periodin2012

2,597dormant

companies

have

re

52

STOCK MARKET


54/63

STOCKMARKET

11th May 26th Dec Growth

KSE index 19,916 25,370 27.38%

Market Rs 5.27 Rs 6.16 22.1%capitalization

(Rs)

trillion trillion

Marketcapitalization US 50.0billion US 57.0billion 11.1%

53

FISCAL POSITION


55/63

FISCALPOSITION(AS

ON

30

NOVEMBER)

1stJuly 30th

November 2013

1stJuly 30th

November 2012

Growth

FBR Rs 792 billion Rs 679 billion 17%

deficit

.

(Rs 570 billion)

.

(Rs 690 billion)

54

FILING OF TAX RETURNS


56/63

FILINGOFTAXRETURNS

1stJuly 16th

December

1stJuly 16th

December

% increase

2013 2012

tax returns

filed

55

FOREIGN REMITTANCES


57/63

FOREIGNREMITTANCES

1stJuly 30thNovember 2013

1stJuly 30thNovember 2012

Growth

US$ 6.4 billion US$ 5.9 billion 7%

56

EXCHANGE RATE


58/63

EXCHANGERATE Speculative

activities

in

the

market

mainly

behind

RupeeDollarexchangeratevolatility

Exchangerate

has

already

improved

from

around

Rs

110.90toRs105.50inlastfewweeks

Aforesaidimprovementinexchangeratehasresultedin

debtofPakistan

Withexpected

foreign

exchange

inflows

in

near

future

andotherappropriatemeasuresbySBP,thePakRupee

57

sexpec e o ur ers reng en n e ays ocome,

inshaAllah

GDPQUARTERLYGROWTHRATE


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Sector / Industry Change (%)

1

st

July 30

th

September 2013 1

st

July 30

th

September 2012

Agriculture 2.5 2.7

n us ry . .

Services 5.7 2.9

Total 5.0 2.9

58

Note:Withinindustrialgrowth,largescalemanufacturingregistered

growthof6.8%asagainst0.4%lastyear


60/63

59

ROADMAP


61/63

ROADMAP

3YEAR

MEDIUM

TERM

TARGETS

7% .

Tax/GDPratiotorisefrom8.5%to13%

to4%ofGDP

Forei nexchan ereservestobeincreased

toaround

US$

20

billion

Publicdebttobereducedtobelow60%of

60

GDPasperstatutoryrequirement


62/63

WITHALLAHS

BLESSINGS

e onour,w atwesay

Wedeliver,

what

we

promise

ewor ns encean wa t61


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62

presentation by finance minister of pakistan to the prime minister of pakistan 2014 januray

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