ISLAMABAD: To counter the adverse impact of the coronavirus, the federal government on Friday decided to give priority to the social as well as health sectors in the next budget for fiscal year 2020-21.
The decision was taken at a meeting chaired by Adviser to the Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh with regard to the budgetary outlook for the next financial year.
The Minister for Industries and Production and the Adviser 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 coronavirus-led economic downturn and in the wake of IMF review.
Sources said the economic team had prioritised ‘Ehsaas’ and social safety net, food security, agriculture (locust control), health security, higher education, defence and public security, sustainable development goals, tourism development, harmonisation of pay and allowances, and public sector development programme (PSDP).
The government is likely to allocate Rs200 billion for social safety programmes and the economic team has also requested IMF to not include the corona related expenses in the ongoing program, they added.
Officials said during the meeting, the debt wing of the Ministry of Finance (MoF) shared the perspective on the budget deficit projections as well as borrowing plans for foreign and domestic components of debt.
T-bills and bonds dominating domestic debt borrowing had witnessed a decline in the cost of debt financing due to robust debt management strategy, they informed the meeting.
It was apprised that choice of timing of tapping the money markets and quantum of debt raising have helped in reshaping the maturity structure of debt portfolios. Growing market confidence has led to saving in borrowing costs for GoP as banks are now dominant participants in auctions.
It was also highlighted that the debt to GDP ratio has been distorted due to economic compression.
Shaikh instructed his team that the option of tapping Sharia compliant bonds might also be exercised to diversify the portfolio.
The Finance Secretary informed the participants that with every one per cent decrease in policy rate, saving of Rs50 billion in debt servicing is expected.
The DG Debt shared the details about re-pricing options for existing domestic debt portfolios, in case of interest rate cuts. The strategy of raising a major chunk of financing needs through floating rate bonds, during a high interest rate environment was appreciated.
The Commerce Aviser 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 investors’ base in the pursuit of better price discovery.
The Finance Secretary shared plans on further expenditure squeeze, rationalising all domains of current expenditure including running of the civil government, interest payments, subsidies and other related expenditures.
A plan was shared to divert current expenditure savings to the corona stimulus financing, under the vision of the Prime Minister of Pakistan.
The Finance Secretary apprised that core areas of reform pertain to general austerity and discouraging supplementary grants as principle. He also shared the proposal of disbursement of electricity subsidy to subsistence consumers through Ehsas, 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 the federation in the backdrop of new NFC talks, as the act would place additional recurring liabilities worth Rs27 billion per year on the platter of the federal government.
The ongoing work on right sizing of the federal government by the PM’s Task Force under Dr Ishrat Husain was appreciated as it is expected to bring a long awaited fresh breeze in the corridors of status quo driven bureaucracy.
Public Finance experts stressed the need to prioritise financing arrangements for Covid-19 related expenditures as adjustment from IMF is available during this window of short duration.
The Finance Adviser, on this occasion, asked 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 utilisation of meagre budgetary resources.