After the expected onslaught of the opposition parties on the 3G licencing process, the government has intensified its effort to stop the process from being derailed which may force it to approach the International Monetary Fund (IMF) sooner than it wanted.
An official source said the government was pinning all its hopes on the three 3G and one 2G licence to bridge the fiscal deficit that is expected to be over 6 percent of the Gross Domestic Product (GDP) because of the estimated Rs 350 billion power subsidy during the current fiscal year. He said the government was hoping to get $800 million from the telecom auctions, which was termed the safest way to make some quick bucks as privatisation of loss-incurring entities were fraught with agitation from the labour unions.
The government decided to opt for technology neutral licences as it was informed that after the failure of 3G services in India and financial crisis in the US and EU, Pakistan might not even attract any of the top international operators. The source said that the IT Ministry and Board of Investment were directed to arrange visits of some top executives of the leading telecommunication companies to show interest in the bidding process and to silence critics.
The sum generated by the telecom licences will be used to bridge the fiscal deficit, which is likely to be over 6 percent during the current fiscal year. The government will be in a tight position after starting of repayment to IMF from March this year. If the external inflows do not improve, the government will be forced to approach the fund before the close of the current fiscal year. The government wants no IMF programme before holding election as it could increase its political difficulties. The members of the ruling party are already forcing the government to take every step to provide uninterrupted electricity to the people during the current election year by even taking loans from the banks, otherwise their party stands no chance of retaining its seats in urban areas. The incumbent government has already passed on Rs 1 trillion in power subsidies to the consumers during the last four years.
The government had estimated external inflows of $800 million on account of the Coalition Support Fund (CSF), $400 million through the Kerry Lugar Bill (KLB) and $880 million on account of PTCL privatisation proceeds, which are struck since 2005. The drop in the external inflow coupled with a widening trade account deficit could have serious repercussions for the foreign exchange reserves and on the exchange rate, the source said. The recently held Monetary and Fiscal Coordination Board meeting noted with concern the current trend in oil prices in the international market and mobilization of foreign inflows as major challenges that might affect the balance of payment and deteriorate external position, he added.
shahzad
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