The debt relief potential from the Group of 20 countries for Pakistan is $1.8 billion for one year, Adviser to Prime Minister on Finance Dr Hafeez Shaikh said on Saturday, while chairing the meeting to review various proposals to kick-start the economy amid the continuing Covid-19 pandemic.
Shaikh spoke on the difficulty of debt relief from G-20 countries during a gathering of the ‘Thinktank’, which had been founded by the finance ministry on the pattern of the economic advisory committee, following instructions from Prime Minister Imran Khan.
The 2nd meeting of the Thinktank deliberated on the COVID-19-related economic downturn and also the mitigation of ensuing risks said finance ministry handout. Shaikh apprised the newly-constituted forum of developments at G-20 forum regarding debt relief package, it added. “There could be a potential for $1.8 billion debt deferment for a year,” the ministry quoted Shaikh as saying.
The G-20 countries had announced a debt deferment plan for poor countries just for May-December 2018 period, which might be extended for one more six months to June 2021 just in case global economic conditions don’t improve.
A few days ago government minister Shah Mehmood Qureshi had said that Pakistan had secured “substantial relief” from the G-20 countries. The Express Tribune had reported $1.5 billion eight months debt relief from G-20 countries.
Speaking in Express-News programme, The Review – the primetime economic affairs programme, ministry spokesperson Ayesha Farooqui said on Friday that Pakistan had not yet formally applied for G-20 debt relief, because the economic affairs and finance ministries were figuring out the technical details.
Pakistan has recently received $1.4 billion from the IMF as an emergency loan to cushion the country’s external reserves and for spending on the health sector.
The Thinktank forum is housed within the finance ministry, just like the Prime Minister’s Economic Advisory Committee. But Hafeez Shaikh had not called any meeting of the EAC since taking the rein of the ministry in April last year.
The forum has been mandated to produce a platform for collective thinking on the emerging situation resulting from the COVID-19-related medical crisis and its spillover effects on the economy. Its other members include Shaukat Tareen, Dr Ishrat Husain, Dr Ijaz Nabi, Sultan Ali Allana, Arif Habib, Dr Waqar Masood, Adviser to the prime minister on commerce and also the finance secretary.
Shaikh informed the meeting that Prime Minister Imran Khan might participate within the next session to provide a boost to the work of the Thinktank, which has been constituted to produce intellectual and professional insights to the ministry in designing and implementing incentives for the economy in a pragmatic fashion.
“Participants highlighted the necessity for the further downward revision in the policy rate in addition to passing on the advantages of slashed oil prices in the global market to the public,” consistent with the finance ministry promulgation.
The financial organization has cumulatively reduced the key policy rate by 4.25% to 9% in past one month but the markets are still expecting an extra cut. there’s a need reducing the interest rates by 2% more to 7%.
The meeting also discussed the necessity for further liquidity for banks, as a robust and vibrant banking sector was essential to spice up the economy under such strong recessionary headwinds, the ministry added. Professionals within the group stressed the necessity for oil price hedging, power sector debt securitisation and creation of fiscal space through rescheduling of foreign and domestic debts, it added.
The need for designing lending programmes for the housing sector also came into consideration including facilitation of the end-users. the large scope for mortgage-backed financing in Pakistan was also highlighted.
The forum discussed the necessity and scope for a bailout package for big businesses and exporters but gauging the viability of reduction of general excise tax on goods, from 17 to five, to kick-start consumer spending for next 2 years, said the ministry.
But the finance secretary apprised the participants of the implications of a steep cut of the excise tax rate for the FBR’s revenues. For the following financial year, the IMF has projected collection target at Rs5.1 trillion – 31% above the downward revised Rs3.9 trillion FBR’s target. “Decision during this regard [GST cut] would be made after detailed consultations”, the finance ministry said.
The Thinktank has identified key areas for policy interventions, including monetary affairs and banking sector, fiscal matters and public finances, social safety nets, SMEs and enormous businesses, commodity prices, public health challenges and role of the personal sector and also the NGOs.
Ways to further encourage remittances, agriculture financing and timely lifting of crops and vegetables from small farmers were analysed. The progress of ongoing cash disbursement under the Ehsas programme was also shared.
The forum emphasised the necessity for gathering reliable data on recently laid-off works and timely cash transfers to the foremost vulnerable. Economists within the Thinktank stressed the necessity for designing PSDP to facilitate labour-intensive projects apart from crafting robust agriculture financing plans.
The need for public-private partnerships was elaborated to form fiscal space within the general public sector through these off-balance-sheet financing arrangements, which encourage private sector participation within the public sector initiatives.
The adviser to the prime minister took the lead in picking most urgent themes for correct policy deliberations and decisions. He decided that interventions with highest, medium and low impacts would be sorted out and aligned on the idea of short, medium and future time horizons in order that most essential tasks were pushed on a priority basis, with proper funding and execution arrangements.
It was also decided that international think-tanks are engaged for cross-learning for select political opinions players in Pakistan in order that robust interventions were designed to bring relief to the economy and most-deserving segments of the public.