Advisor to the Prime Minister on Finance & Revenue Dr. Abdul Hafeez Shaikh has called for a demonstration of fiscally responsible attitude as the Coronavirus led impacts are expected to deeply distort the economic fabric of Pakistan.
He has also called on all the Federal Ministries and Divisions for innovative and out of the box brainstorming to achieve further cost-cutting, along with efficient utilization of meager budgetary resources.
The Adviser was addressing a meeting held at the Finance Division to discuss the budgetary outlook for the next financial year. The Minister for Industries & Production and Advisor to PM on Commerce also participated in the meeting apart from the core team of the Finance Division.
The focus of the meeting was on spending priorities of the Federal Government amid the economic downturn in the wake of IMF review and COVID-19.
During the meeting, the Debt Wing of the Ministry of Finance shared the perspective on budget deficit projections as well as borrowing plans for foreign and domestic components of debt. T-bills and bonds dominated domestic debt borrowing has witnessed a decline in the cost of debt financing due to robust debt management strategy.
It was apprised that the choice of timing of tapping the money markets and quantum of debt raising has helped reshape the maturity structure of the debt portfolio. Growing market confidence has led to saving in borrowings costs for the Government of Pakistan as banks are now dominant participants in auctions.
It was highlighted that the debt to GDP ratio has been distorted due to economic compression. Advisor Finance instructed that the option of tapping sharia-compliant bonds may also be exercised to diversify the portfolio. Finance Secretary shared that with every one percent decrease in the policy rate, a saving of Rs. 50 billion in debt servicing is expected.
DG Debt shared the details about repricing options for existing domestic debt portfolio, in case of interest rate cuts. The strategy of raising a major chunk of financing needs through floating rate bonds during the high-interest rate environment was appreciated.
Advisor Commerce advised that debt managers must keep an eye on the yield curve inversion and its implications on borrowing choices in a macroeconomic climate dominated by recessionary headwinds. Dr. Ishrat Husain highlighted the significance of broadening the investor base in the pursuit of better price discovery.
Finance Secretary shared plans on further expenditure squeeze, rationalizing all domains of current expenditure including running of civil government, interest payments, subsidies, and other related expenditures. The plan was shared to divert current expenditure savings to Corona Stimulus financing, under the vision of Prime Minister of Pakistan. Finance Secretary apprised that core areas of reform pertain to general austerity and discouraging Supplementary Grants as a principle.
He also shared the proposal of disbursement of an electricity subsidy to subsistence consumers through the Ehsaas program, damage control in PSEs including their selective turnaround and scope of their management outsourcing through PPP modalities.
The team deliberated on the transfer of four tertiary care hospitals from Provinces to Federation in the backdrop of new NFC talks, as the act would place additional recurring liabilities worth Rs. 27 billion per year on the platter of Federal Government.
The ongoing work on the right-sizing of the Federal Government by PM’s Task Force under Dr. Ishrat Husain was appreciated as it is expected to bring long-awaited fresh breeze in the corridors of the status quo drove bureaucracy.
Public Finance experts stressed the need to prioritize financing arrangements for COVID-19 related expenditures as adjustor from IMF is available during this window of short duration. Advisor Finance advised for demonstration of fiscally responsible attitude as corona led impacts are expected to deeply distort the economic fabric of Pakistan.
He requested all Federal Ministries and Divisions to have innovative and out of box brainstorming to achieve further cost-cutting, along with efficient utilization of meager budgetary resources.