PM-formed think-tank identifies key areas to boost economy

–Forum mulls reducing GST on consumer goods from 17pc to 5pc

–Members highlight need for further reduction in policy rate, oil prices 

ISLAMABAD: Adviser to Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh chaired the second meeting of the think-tank constituted recently by the prime minister to deliberate on the COVID-19 related economic downturn and mitigation of the ensuing risks.

The forum has been mandated to provide a platform for collective thinking on the emerging situation resulting from the Covid-19 related medical crisis and its spillover to the economy. Its other members include Shaukat Tareen, Dr Ishrat Husain, Dr Ijaz Nabi, Sultan Ali Allana, Arif Habib, and Dr Waqar Masood.

After extensive deliberations on emerging themes, the forum identified key areas for policy interventions, including monetary affairs and banking sector, fiscal matters and public finances, social safety nets, SMEs and large businesses, commodity prices, public health challenges and role of private sector and NGOs.

The adviser apprised the forum about developments at the G-20 forum regarding the debt relief package. “There is potential for $1.8 billion debt deferment for one year under this, whereas proceeds worth $1.4 billion under IMF have already been received,” he stated.

Participants highlighted the need for further downward revision in policy rate coupled with passing on the benefits of slashed oil prices in the global market to the public. The focus of the deliberations remained on strengthening the aggregate demand and supply of the economy, with emphasis on lower income groups and small firms.

Need for further liquidity for banks was discussed, as a strong and vibrant banking sector is essential to boost the economy under such strong recessionary headwinds.

Ways to further encourage remittances, agriculture financing and timely lifting of crops and vegetables from small farmers were also analysed.

The forum discussed the need and scope for a bailout package for large businesses and exporters, apart from gauging the viability of reduction of GST on consumer goods, from 17pc to 5pc, to kick-start consumer spending for next two years.

The constraints of FBR amid high revenue targets in a shrinking economy were highlighted by the finance secretary. Decisions in this regard would be made after further consultations.

The progress of ongoing cash disbursements under Ehsas programme were shared on the occasion. The need for gathering reliable data on recently laid-off workers and timely cash transfers to the most vulnerable were also emphasized.

Economists within the think-tank stressed the need of designing PSDP to facilitate labour intensive projects apart from crafting robust agriculture financing plans. The need for public private partnerships was elaborated to create fiscal space within the public sector through ‘off-balance sheet financing arrangements’ which encourage private sector participation in public sector initiatives.

Professionals within the group stressed the need of oil price hedging, power sector debt securitization and creation of fiscal space through rescheduling of foreign and domestic debts. The need for designing lending programs for housing sector participants came under consideration including facilitation of end-users. The massive scope for mortgage-backed financing in Pakistan was also highlighted.

The finance adviser took lead in picking most urgent themes for proper policy deliberations and decisions.

He shared that the PM may participate in the next session to give a boost to the work of this forum, which has been constituted to provide intellectual and professional insights to the ministry in designing and implementing incentives for economy in pragmatic fashion.

He decided that interventions with highest, medium and low impacts would be sorted out and aligned on the basis of short, medium and long term time horizons so that most essential tasks are pushed on priority basis, with proper funding and execution arrangements.