GDP growth projected to cross 5% this year

Govt to achieve 60% of its short-term financial targets in 2014, plans to privatise eight state units on priority basis

By Abdul Basit

Published: Wed 19 Feb 2014, 11:15 AM

Last updated: Fri 3 Apr 2015, 5:53 PM

Economic indicators start showing positive signs and the Pakistan Muslim League-Nawaz [PML-N] government hopes to achieve 60 per cent of its short-term financial targets in 2014, according to the finance minister.

The government looks confident of achieving targets set for 2014 that include doubling of foreign exchange reserves and significant growth in remittances, taxes and more than five per cent growth in gross domestic product, known as GDP.

Forex reserves fell below $8 billion, according to the latest data available but finance minister Mohammed Ishaq Dar hopes that with the government’s sincere efforts foreign exchange reserves would be taken to more than $10 billion by the end of March 2014, and around $16 billion by the end of December 2014.

Last week, the United States had released $352 million to Pakistan under the Coalition Support Fund (CSF) that will also put some weight on forex reserves. The International Monetary Fund is also expected to release $550 million next month to national exchequer.

Remittances from Pakistanis abroad also increasing rapidly and jumped by 9.5 per cent to $7.8 billion in the July-December period, which is the first half the fiscal year 2013-14.

Senator Dar said that expatriate Pakistanis are playing an important role in the development of the country through their remittances and projection of positive image of Pakistan.

The minister said that there were two options to overcome fiscal deficit; slashing the expenditure and increasing the revenue and added that the present government had been working on both options at the same time. He said the government had cut down public sector expenditure by 30 per cent across the board and all discretionary funds of the ministers had been done away with.

The minister reiterated that a number of measures were taken to enhance country’s revenue collection, resultantly it had increased by 26 per cent in January this year over the collection of January last year. Federal revenues jumped by more than 17 per cent during the first seven months of the current fiscal year, he added.

The Federal Board of Revenue expects to collection Rs2,471 billion revenues during 2013-14 against the previous year’s (2012-13) revenue collection of Rs1,946 billion.

Dar said that the government is trying to improve GDP ratio, which is one of the lowest in the region. During the first quarter July-Sept) of 2013-14 fiscal year, GDP crossed five per cent growth mark. “We intend to take it to six per cent in three years,” the minister said, adding that Pakistan’s total GDP is around $225 billion.

Shares divestment

Dar said the PML-N government is keen to disinvest the shares of three banks and two oil & gas companies through capital market offerings by June this year.

The federal minister said that at present national and international capital markets are buoyant and the country must benefit from the investors’ confidence in present government. “Share divestment might be done by June, 2014,” Dar said.

He said the Privatisation Commission (PC) has started the process of hiring financial advisors for public offerings and others units, which are on the priority list of the commission. “This process will be completed by June 2014.”

There are 68 public sector enterprises (PSEs) on the privatisation list of PC but the Cabinet Committee on Privatisation in its meeting held in October 2013 approved only 32 units for early sell-off. The list includes entities pertaining to various sectors like oil & gas, banking & finance, power, industries, transport and real estate, among others.

Out of the 32 units, eight transactions are on top priority list that include Oil and Gas Development Company Ltd (OGDCL), Pakistan Petroleum Ltd (PPL), Habib Bank Ltd (HBL), United Bank Ltd (UBL) and Allied Bank Ltd (ABL) through capital market offerings. Rest of Heavy Electrical Complex, National Power Construction Corporation and Pakistan International Airlines Corporation (PIAC) with management control to strategic partners.

The PC board had approved divestment of shares in HBL, UBL, ABL, OGDCL, and PPL at a meeting last month. These five units may attract $2.5 billion into national exchequer, according to sources in the PC. The PC chairman Muhammad Zubair expects that Pakistan can raise up to $5 billion in privatisation revenue in the next two years.

With regard to Pakistan International Airlines (PIAC), the PC board resolved to divest minimum of 26 per cent shares to a strategic investor and approved initiation process for the selection of the financial advisor for the purpose.

About the privatisation of national flag carrier, Dar said the government is in process of hiring a financial advisor to divest its 26 per cent shares through capital market.

“We are talking about a strategic partner and 26 per cent is not privatisation as people of Pakistan will remain the owner of 74 per cent [shares].” “It will improve the quality of remaining 74 per cent shares,” he said, adding the financial advisors will come up with a proposal and the [privatisation] will be done through due process.”

Privatisation earnings

The PML-N government may find the strategic partners for PIA and other units in due course of time, but the real challenges is deal with opposition parties in the country and thousands of workers belong to the units, which are under the process of privatisation, according to a senior analyst.

The PC has earned Rs349.652 billion through the privatisation of 49 transactions from the year 2002 to 2008. According to sources in PC, about Rs225.655 billion had been utilised for debt retirement from 2002 to 2008 while Rs108.283 billion had been utilised by DFIs. The remaining Rs16.716 billion had been paid as Golden Handshake and Voluntary Separation Scheme to the employees of privatised institutions.

Out of a total Rs349.652 billion earned by the PC from 2002 to 2008, a sum of Rs22.970 billion were earned in 2003, Rs32.733 billion in 2004, Rs43.497 billion in 2005, Rs128.818 billion in 2006, Rs109.473 billion in 2007 and Rs12.161 billion had been earned by privatisation of government entities in 2008.