The government has revised the Gross Domestic Product (GDP) growth target from 4.2 per cent to 3.6 per cent due to September floods in Sindh, war on terror and overall energy crisis in the country.
3G license auction
Sources well informed with the current economic situation in the country told profit, the government is all set to launch the auction of 3-G licenses to telecommunication companies as the formalities for the launch have almost been completed. The first advertisement for the auction is to appear in news papers by next week and bidding is expected to be completed by mid March next year. More spectrums would be made available for 3/4G services and offered for auction with the provision that winners of such auction will receive amended licences and allocated frequencies by March 2013 and as such will be able to start their services thereafter.
Etisalat to release $800m
The government is also eyeing to receive $800 million from Etisalat in the privatisation process of Pakistan Telecommunication Company limited (PTCL) as 95 per cent work on transfer of properties has been completed and it is expected that Etisalat will release this amount within the targeted period. Sources informed that Pakistan’s arrears against United States on account of Coalition Support Fund (CSF) are $2.5 billion and government has budgeted only $800 million for the ongoing fiscal year 2011-12. US has already completed the processing of $400 million so far and these funds should come with no further delay. The sources said Pakistan’s claim is valid as it has incurred these expenditures and therefore the said payment is not part of an aid package but rather reimbursements.
US reimbursements
Explaining the historical trend of approval of Pakistan’s CSF claims, the sources said that some 60 per cent to 65 per cent claim of CSF are normally accepted by the US and 35 per cent claims are not accepted owing to different reasons. The sources said that Pakistan borrows this money and spends on war on terror and delay in CSF funds are covered by the tax payers money. Pakistan has time and again raised this issue with US authorities in CSF review meetings.
Govt curtails spending
On the expenditures side, government spending in the first six months were supposed to stand at 50 per cent of total expenditures by December 31, 2011, however, due to austerity measures ministry of finance has managed it to keep them at 38 per cent of the total expenditure and the final figure is expected to touch 42 per cent of the total with savings of 8 per cent. Explaining the savings in expenditures, the sources informed that overall current expenditures have been recorded at 39 per cent in first five months (Jul-Nov), interest payments have remained at 39 per cent of the total allocation and amounted to Rs34 billion, Defense expenditures stood at 38 per cent of the total allocation and amounted to Rs187 billion, and other expenditures stood at 39 per cent or 368 billion.
Deficit financing
Explaining the resource mobilisation for deficit financing, the official sources informed that auction for Sukuk Bonds worth Rs50 billion is to be completed by December 20 for M-2, having a valuation of Rs250 billion. Sources further informed that other options that are in hand are exchangeable bonds, international Sukuk and commercial borrowing.
48b subsidy to power sector
Government has so far given Rs48 billion subsidy to the power sector in the first five months of FY12, highest in all subsidy sectors. Some Rs20 billion would be disbursed under Benazir Income Support Program till December 31, 2011. The overall price of oil in international market was $75 per barrel which has increased to $105 to $110 per barrel and a base effect of $40 per barrel has been faced by the economy. Some 40 per cent, or Rs.100 billion is to be spent under Public Sector Development Program till December 31, 2011 out of a total local components of Rs.220 billion, sources said.
11.5pc increase in exports
Agriculture growth outlook is positive and federal revenues have shown remarkable growth. Exports have also registered a growth of 11.5 per cent in first five months of the fiscal year and imports have witnessed a growth of 20 per cent on receipts basis. Sources informed that government has projected 10 per cent growth in imports and 5 per cent growth in exports in it’s balance of payment plan and so far trade deficit has been recorded at $6.4 billion in the first five months. In the remaining seven months government has a cushion of adding a further $8 billion in deficit to reach a target fixed for overall trade deficit at $14.4 billion.
12pc power tariff increase
The sources further explained that government is eyeing no major increase in imports and if exports go even in the negative the balance of payments would still remain in control. The government has projected that a 12 per cent increase in power tariff will be required for ongoing fiscal year. Large Scale Manufacturing (LSM) however, exhibited growth and against the target of two per cent the LSM growth has been recorded 3.6 per cent in first six months of the ongoing fiscal year 2011-12. Remittances have witnessed a growth of 80 per cent during first five months and stood at $5.2 billion.
3pc drop in Consumer Price Index
Consumer Price Index (CPI) has shown a declining trend and declined from 14 per cent to 11 per cent in the first five months while Sensitive Price Index (SPI) also depicted a declining trend and stood at 4.9 per cent, sources remarked. Federal Board of Revenue (FBR) has also collected Rs712 billion in tax revenues, depicting a 28 per cent increase in the first five months of FY12against Rs555 billion in the same period last year.