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Sunday, 11 November, 2012
‘We dragged the economy out of a veritable quagmire’ ISLAMABAD
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EDERAL Minister for Finance, Dr Abdul Hafeez Shaikh said on Friday notwithstanding eight big inherited challenges, the government’s prudent polices brought about macroeconomic stability, reduced inflation to single digit, maintained fiscal discipline, created jobs, doubled revenues and bolstered the vulnerable segment of the society. The government focused on sound monetary policy to bring down inflation rate and ensured fiscal discipline by taking austerity measures, he said while talking in a talk show on Pakistan Television. The inflation rate has been reduced from the peak 25 percent in 2008 to 9 percent now, which he described as a great achievement of the government. On the other hand, the government implemented fiscal discipline which is evident from the fact that as compared to 1011 percent increase in inflation rate, the federal government expenditures have
gone up by just 6 percent while that of provinces increased by 21 percent. These expenditures included defence, payback loans and civil government expenditures, which he said remained stagnant at Rs 200 billion. Giving details about the performance of revenue collection system, the federal minister said that the tax collection has been more than doubled from Rs 1000 billion to Rs 2300 billion during the past four and a half years. The Federal Minister for Finance, Dr Hafeez Shaikh said the tax collection ratio has increased by 21 percent as Rs 350 billion additional revenues was collected in the financial year 201112. The government is following the strategy of self-dependence and in this regard more and more new tax payers are being brought under tax net. He said there were some sectors which were enjoying zero rating facility but have now been brought under tax. D r H a f e e z Shaikh said the people who are not paying their due taxes
and non-filers will be brought under tax net, whereas the people who are already paying their taxes are being facilitated by reducing tax burden on them. “In the current fiscal year’s budget, we have done away with many taxes and tax slabs have also been reduced to benefit the tax payers”, he remarked. He said that this year, the focus would be on expanding income tax base while the government during the past year had focused on sales tax and had brought about many changes in the overall taxation system. On the other hand, the borrowings of the government have also reduced as compared to its income, he said and added the country’s income was Rs 10,000 billion four years ago, which is now Rs 20,000 billion. “If borrowings have increased, the income has also increased,” he said and added that the government cannot borrow more than 56-60 percent of the GDP. The government did not forget the poorest of the poor as three million vulnerable families were provided social safety net under Benazir Income Support Programme (BISP) for which the country is being appreciated the world over, he said adding the programme would help empower women. The federal minister said that the overall growth rate decreased by 2 percent due to floods which caused damage amounting to 10 billion dollars. However, he maintained that the economic expansion has been reducing all across the globe. Citing example of India’s growth which is forecast to remain under 5%, with China 6%, Europe and the United Kingdom in negative while the United States 2%. He said that the government has regularized 3,000 contract government employees and reinstated 30,000 employees. He said that the government has launched about 650 projects worth Rs 3000 billion during the past four years which created jobs and would help in the over all development of the country. Talking about the challenges of food security, he said that Pakistan has been far better
than many countries inthis sector. Going back to the past, the Finance Minister said, when the present government came into power, the economic growth momentum was slowed down while the GDP was at 2% in 2008 with inflation touching the highest 25%.The country’s stock market was almost closed while there was big burden on current account and fiscal discipline and the foreign exchanges were reduced as low as $ 5 billion. The value of rupee was also depreciated from Rs 60 to Rs 80 against dollar while there was no increase in electricity generation capacity and above all the law and order situation was deteriorated. It was this situation when the government had to take hard decisions and go to International Monetary Fund for loan under a standby agreement. Dr Hafeez Shaikh said that human resource development, export capabilities and private sector growth were imperative for growth and above all, the rule of law was most important to ensure growth and stability. Dr Shaikh said that the government had laid down strong foundations for the prosperous future of Pakistan and “new Pakistan is emerging.” Institutions are independent in their domain as the Bank of Pakistan, Securities and Exchange Commission of Pakistan, Competition of Pakistan, Courts and other institutions including media are independent which is a positive development towards bright future. He said that democracy is back on tract, Constitution has been restored, parliament is strengthened, provinces were made autonomous and a good political culture has been created where institutions work in their respective domain. The finance minister termed the 18th Amendment and National Finance Commission award as two historic decisions of the present government, which would help build a prosperous Pakistan. The federal minister for Finance said that although the responsibilities of provinces have increased as the federal government has provided Rs 5000 billion to them to manage their affairs.
Afghanistan beckons India’s business leaders to invest Afghanistan is “ripe and ready” for Indian investments in mining and other sectors, President Hamid Karzai told business leaders in Mumbai on Saturday at the start of a trip to woo investors for his war-ravaged country
MUMBAI AGENCIES
“We’d like to welcome you with a red carpet, but you need to arrive at the red carpet,” he told delegates at an Indian industry event in the financial capital. “What I’d like to emphasize in particular is that Indian businesses need not be shy when thinking about Afghanistan. The Chinese businesses were there long before you came, five or six years before.” India has invested billions of dollars in Afghanistan since the Taliban regime’s ouster in 2001 and has urged private firms to invest there, though many have misgivings about the security climate after 2014, when most foreign troops will leave. China is also looking to tap into Afghanistan’s mineral reserves. A consortium led by state-firm Steel Authority of India last year won the rights to develop a huge iron ore deposit in central Afghanistan and a nearby 6 million metric ton steel plant at a cost of around $11 billion. China won a huge copper concession not far from Kabul, as well as oil blocks in the north. However, both Asian giants have been held back in Afghanistan by security concerns as well as poor infrastructure in the landlocked, mountainous country. India also has to tread carefully in Afghanistan because of the suspicions of arch-rival Pakistan, which sees New Delhi’s expanding role in its neighbor as a move to encircle it. Indian Commerce and Industry Minister Anand Sharma told the meeting with Karzai that New Delhi would look at engaging with Kabul to develop infrastructure such as highways, power projects, Chahbahar port and energy security.
Euro at two-month low versus dollar on European growth concerns The euro dropped to a two-month low against the US dollar and could extend losses further as fears mount that the euro zone’s debt crisis and deteriorating economic conditions could drag down global economic growth NEW YORK AGENCIES
The U.S. dollar and the yen advanced, while the Australian dollar weakened, as investors shed growth-linked currencies in favor of safe havens. Growth in Germany, Europe’s largest economy, is likely to slow in the fourth quarter and the first three months of 2013, the Economy Ministry said. Industrial production in France, Europe’s second-largest economy, shrank in October and the country’s central bank said it expected to slip into recession at the end of 2012. “It’s the core Europe now, not just the peripheral Europe, that may be sliding into a recession,” said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York. “If that happens, then China will lose its export market and the whole global economy will begin to contract.” “The market is really afraid that Europe could drag the whole global economy down.” The euro fell as low as $1.2688 on Reuters data, the weakest since Septem-
ber 7, and was last down 0.27 percent at $1.2710. It also hit a one-month low of 100.38 yen and was last down 0.32 percent at 100.94 yen. Traders said the euro could target the 100-day moving average around $1.2636 and the September 7 low of $1.2625. “There has been a rather poisonous cocktail that is dragging the euro down with weak European numbers today and renewed fears of the euro zone crisis with Greece back on the agenda,” said Arne Lohmann Rasmussen, head of FX strategy at Danske markets. “We would not be surprised if we saw the euro drop to the $1.25 level within the next three to four weeks.” Investors were also nervous ahead of a Greek vote on Sunday on the country’s 2013 budget, the next big hurdle towards unlocking access to urgently needed international aid after Wednesday’s tight vote in favor of an austerity package worth 13.5 billion euros. However, euro zone finance ministers were unlikely to sign off on the next tranche of aid for Greece at a meeting on
Monday, according to a senior EU official. Uncertainty over whether Spain will apply for financial aid also cast a shadow over the euro. Such a move would allow the European Central Bank to buy its bonds and lift the euro. Spain has so far resisted asking for aid. The prospect of
ECB support has driven its borrowing costs down and it has met its 2012 bond issuance target. “We are looking at a game of chicken between Spanish Prime Minister Mariano Rajoy and the bond markets for looking at a bailout,” said John Hardy, FX strategist at Saxo Bank. DOLLAR STRENGTH: As the euro wilted, the dollar’s index against a basket of currencies .DXY rose 0.30 percent to 81.037, having earlier risen to 81.087, a two-month high. Worries over a looming “fiscal cliff” for the United States, which could trigger tax rises and spending cuts if unresolved, was likely to prompt investors to buy the safe-haven dollar. But for now, Europe remains a bigger worry, some analysts said. “I think everybody understands and appreciates that if there won’t be any kind of a compromise, there
will be some sort of a delay,” BK Asset Management’s Schlossberg said, referring to the U.S. fiscal cliff. U.S. President Barack Obama, fresh from his re-election victory over Republican candidate Mitt Romney, called on the U.S. Congress to meet with him next week to work out a compromise budget plan to avoid the “fiscal cliff.” Obama insisted any plan would require a tax increase for the very rich while John Boehner, the Republican Speaker of the House of Representatives repeated his party’s commitment not to raise anyone’s tax rates as part of a deal to address the fiscal crisis. The dollar fell to a three-week low of 79.06 yen, before recovering to 79.42 yen, little changed on the day. Data showing U.S. consumer sentiment rising to its highest level in more than five years boosted stocks and Treasury yields, helping the dollar rebound against the yen. The Australian dollar lost 0.11 percent to $1.0388. The Swedish crown weakened against the euro and the dollar as industrial output saw its largest fall for more than three years. Analysts said this raised expectations of a rate cut in December.