Senate demands recovery of $2.5b Coalition Fund dues

The Senate Standing Committee on Finance on Tuesday directed the government to take a firm stance on the recovery of $2.5 billion dues under the Coalition Support Fund (CSF) from the United States and even asked for directing generals for refraining from sending inflated bills that cause delay in the timely clearance of bills. The meeting of the committee was held under the chairmanship of Senator Ahmad Ali. The committee expressed reservations over the government’s plan based upon the assumptions that increase in exports and remittances will allow it a smooth sailing without any financial assistance from the International Monetary Fund (IMF) during the current fiscal year.

Demanding our share?

Senator Ishaq Dar of PML-N asked Secretary Finance Dr Waqar Masud Khan on the progress of recovery of $2.5 billion CSF dues from US. He said during talks with US officials recently in Washington everybody gave positive response but no one could give any timeframe of release. Dar said the government should take a firm stand on the recovery of dues as it was Pakistan’s money and not charity. He also asked for advising the generals from refraining from over invoicing bills. “Our billing should be honest and templates should be filled in the proper manner”. He sought a firm stance for the reimbursement as it was Pakistan’s money and not charity like Kerry Lugar Bill. US had made a reimbursement of $700 million to Pakistan in December last year. While US has withheld payment of another $500 million, due to accounting and audit issues, which were promised to be released before the end of last fiscal year. This was the major reason for the increase of fiscal deficit to 6.4 per cent of GDP during the last fiscal year. Dar also castigated the government for its failure to stop grey trafficking, which he said was being done by the cronies of the government and resulting in delay in payment of $800 million from the United Arab Emirates owned Etisalat for the purchase of PTCL. “The real issue of the non payment by Etisalat is grey trafficking and not the transfer of land titles”.

Exit from IMF

Briefing the committee Secretary Finance said the positive development on the external front will help the government survive at least the current fiscal year without an IMF program. He stated that exports last year were $25 billion and remittances amounted to $11.2 billion which were estimated to increase to over $26.5 billion and $12 billion respectively during the current fiscal year. The repayment of $1.2 billion to IMF will not put any pressure on the foreign exchange reserves. Senator Ishaq Dar of PML-N sought details on the foreign exchange reserves on June 30, 2011 and at the end of first quarter for the current fiscal year. Secretary Finance said the foreign exchange reserves were $18.3 billion, $14.8 billion with the State Bank of Pakistan (SBP) and $3.5 billion with commercial banks at the end of last fiscal year and they were $17.1 billion, $13.4 billion with SBP and $3.7 billion with commercial banks on October 10, 2011. Dar noted that the foreign exchange reserves were already under pressure as was evident from a decrease of $1.2 billion. Senator Haroon Akhtar Khan of PML-Like Minded said the pressure on the foreign exchange reserves will be affecting the Pak Rupee US$ parity that will further jack up inflationary pressure in coming months. They did not agree with the Finance Secretary’s argument that there would be no pressure on the foreign exchange reserves without IMF program. They said the pressure will increase substantially as during the next two fiscal years the government will be repaying $ 6.5 billion to IMF.

Quantitative increase?

Haroon Akhtar Khan said the increase in exports was temporary as the prices of cotton have declined and out of the $5 billion increase in exports $3 billion were achieved only in the textile sector, which has shown no increase in quantity. He observed that without resolution of circular debt the power situation would not improve and the cut in the discount rate would not help achieve the desired objective. Secretary Finance acceded that the progress on power sector reforms was a big worry as it would create an additional burden of Rs300 billion on the government during the current fiscal year if rectifying steps were not taken. He said Asian Development Bank was working on a permanent solution for resolving the circular debt which would be jointly financed by the ADB and World Bank.

Irregularities in CCP?

Earlier a heated debate took place between the Chairperson Competition Commission of Pakistan Rahat Kaunain Hasan and Senator Haroon Akhtar Khan, who had raised the issue of alleged corruption in the commission that were mentioned in an anonymous email. Chairperson of CCP strongly denied the allegations and said it needs to be appreciated that there was not a single incidence of corruption in the matter of enforcement of competition law. They were instances of financial irregularities committed prior to her assumption of charge and these irregularities were unveiled and the entire amount was recovered. She said that no case had been given to her former firm, Hassan Kaunain Nafees, for any fee consideration. Only in one matter a partner of that firm, Azir Nafees, was engaged by the former Chairman of CCP without any fee due to his expertise and superior understanding of constitutional issues and he succeeded in getting a favorable interim relief from the court. She asked from the committee whether it was appropriate that a high forum like the committee started to inquire about anonymous emails and asked who should be held responsible if the allegations proved incorrect. Chairman Ahmad Ali observed that anonymous letter and email have no value. Senator Dar also advised her to take the matter lightly as it is the price one had to pay while being at a top post in an institution. Chairman of the committee decided to form a committee comprising of Professor Khurshid Ahmad and Safdar Abbasi to look in the allegations and submit report.