Finance ministry challenges figures given in report by The News

ISLAMABAD: The finance ministry has issued a rebuttal to the report in The News titled “GDP Growth Worked Out?” written by Khalid Mustafa, published on June 23, and called it misleading and based on an ignorance of the system of computation of GDP estimates followed in Pakistan as well as internationally.

It said the reporter is harping on the issue that the GDP growth number for 2013-14 are much lower than those estimated by the PBS.

This issue has already been responded by Pakistan Bureau of Statistics (PBS) in different newspapers.“It is clarified that annual estimates of GDP as well as GFCF for the year 2011-12 (Final), 2012-13 (Revised) and 2013-14 (Provisional) were approved by the National Accounts Committee (NAC) Meeting on 15th May, purely on the basis of data available up to that point of time and not in accordance with the desires of any one in the government hierarchy. The data for the balance of the year is projected, which is the reason that these numbers are provisional and remain provisional till full data becomes available over the following months.

The correspondent has also commented on the quarterly GDP estimates.

The first quarter growth and the second quarter/mid-year growth, both were released by PBS; one is acceptable to the writer while the other is not. The IMF accepted the figure of PBS which should be ample proof of the reliability of the statistics released by PBS.

As far as the question of withholding the information of large scale manufacturing is concerned, it is completely baseless. The Quantum Index Manufacturing Industries (QIM), the indicator being used to measure the performance of this sector, is compiled on the basis of information received from three major sources including Oil Companies Advisory Committee (OCAC), Ministry of Industries and Provincial Bureau of Statistics which takes time and is published after certain time lag. The latest available information was up to the month of February, 2014 was used to derive the estimates of large scale manufacturing which were approved by the NAC. Further, the writer has completely misstated the facts by quoting that the budgeted PSDP of Rs1150 billion has been used in the compilation of value addition of construction. The fact is that total value addition of construction sector even at current prices is Rs494.3 billion; therefore, the question of inclusion or exclusion of these PSDP figures is not relevant.

The correspondent has also mistakenly attributed the profits of commercial banks with the value addition of finance and insurance sector. The value addition of this sector, being compiled through Financial Intermediaries Services Measured (FISM), is based on the amount of advances and loans and not on profits of banks.

The correspondent gives his verdict that the GDP growth is 3.5 %. He has not given any analysis to support his claim but has picked up a number that is being bandied about in the press. The commentators need to familiarise themselves with the methods of GDP computation before commenting on technical issues.

In connection with his view on budget number to show lower budget deficit; it is stated that writer’s view is not correct. PTA is a government authority responsible to collect the licensing / auction fees on behalf of the federal government and such auction fees on behalf of the federal government and such auction fees are always form part of the Federal Consolidated Fund. Similarly, the non-tax revenues receipts are revenue of the federal government administered by various ministries/divisions/departments and comprise of following main sources: i) Income from property and enterprise, ii) Receipts from civil administration and other functions, iii) Miscellaneous receipts.

The income from property includes the mark up recovered from the provinces and public sector enterprises, dividend and other receipts of the regulatory bodies. The receipts from civil administration comprise of State Bank of Pakistan (SBP) Profit, Defense Receipts, Law & Order Receipts etc.

The foreign grants are reflected under non-tax receipts according to the Chart of Accounts, as per International Best Practices. These are always form part of the federal government and the actual receipts under these heads can be verified from the historical data disseminated on the Website of the finance division.

Khalid Mustafa adds: I am grateful that the Ministry of Finance has given me the opportunity to further highlight the mistakes the government has committed in calculating the provisional GDP growth of current financial year 2013-14 at 4.1 percent. The article I wrote in Money Matters — the magazine of The News International which was published on June 23, is not misleading, rather it mirrors the manipulations done to show better GDP growth.

Some of the issues the finance ministry has raised in the clarification I have factually not mentioned in my article. For example, I have not mentioned anything about the revised GDP growth targets; rather I kept my focus on provisional GDP growth which the government has worked out based on the numbers of first 9 months of the current fiscal which suit the government.

Coming to paragraph three of the clarification, I know very well that PBS came out with the work-in-progress quarterly estimates of GDP and according to PBS calculations, as per the work in progress, the real GDP grew by 5.1% in the first quarter of 2013-14. The officials of PBS went to show this number to finance minister; because that was the first time they calculated quarterly GDP. The finance minister got excited knowing the fact that this is a work in progress and went ahead and informed Prime Minister Nawaz Sharif, and leaked the number to the press.

It attracted widespread criticism from professional economists because the number was beyond their expectations. After that the finance minister started saying, “I don’t own this number, but at the same time I don’t disown this number.”

In the paragraph 4 of the clarification, finance ministry claimed that it has not withheld the information about Large Scale Manufacturing (LSM). I do not agree with the ministry as it has withheld the information of large manufacturing scale for the month of March that shows negative growth of 2.7% and for July-March period, the number was down to 4.3% as opposed to 5.3% used in calculation of the GDP keeping in view of the number of first 8 months not the 9 months. Here the government has visibly played the foul.

About the 11% growth in construction sector the government has worked out is highly questionable as there is no one-to-one correspondence between PSDP and value added in construction. It is known to everyone that construction growth is derived from the cement production and growth in cement production has alarmingly stayed at 0.13% which is almost flat. When there is flat growth in cement production, then how construction sector can grow by 11%. The 11% growth in construction sector becomes more controversial when the PSDP has already been slashed to Rs393 billion. Here I would appreciate if the government shares with the masses and with me the methodology of calculating value added in construction as the 11% growth in construction sector is not understandable. If the cement is not utilised, then what’s the rationale of 11% growth in construction? Here I’ll be happy to see the methodology used by the government.

In the clarification, the ministry has criticised the author of the article saying he had given his verdict that the GDP growth is 3.5% without any analysis to support his claim. Here I want to clarify that I have mentioned 3.5% growth with supporting facts by stating both saving and investment have declined sharply compared to last year. How on the earth, GDP growth can accelerate in the midst of declining saving and investment rate. I will appreciate if the government clarifies this anomaly.

In the clarification the ministry stated that writer’s view is not correct on government’s intention to show the better growth arguing that PTA is a government authority responsible to collect the licensing / auction fees on behalf of the federal government and such auction fees on behalf of the federal government and such auction fees are always form part of the Federal Consolidated Fund. Similarly, the non-tax revenues receipts are revenue of the federal government administered by various ministries/divisions/departments and comprise of following main sources.

Here I clearly want to mention that I did not raise the said issue what clarification says. However, I did mention about the utilisation of Universal Services Fund (USF) for which cellular companies contribute a certain portion of their profits. USF is meant for infrastructural development in telecommunication sector and the huge amount in the fund was accumulated over the last several years and how can the government use the resources accumulated over the years in just one year. To the best of my knowledge, cellular companies have already gone to Supreme Court and challenged the taking over of this amount as non-tax revenue.

In the last paragraph of the clarification, the finance ministry says that the foreign grants are reflected under non-tax receipts according to the Chart of Accounts, as per International Best Practices. If this is the best international practice, then why does IMF treat fiscal deficit separately with and without foreign grants.

The Finance Division is best advised to look at the IMF program document. By treating foreign grants as revenue, the government has eliminated the difference and readers can see in the IMF document, particularly in fiscal table that foreign grants appear as separate line item and has never been treated as part of non-tax revenue.

Therefore, the author stands by its article.

National Assembly approves Finance Bill 2014-15

ISLAMABAD: The National Assembly on Saturday approved the Finance Bill for fiscal year 2014-15 with total outlay of Rs 4.3 trillion, accepting some amendments moved by the government and rejecting all ones from the opposition benches.

Following nine-day discussion, the 149-page Finance Bill was moved by Minister for Finance Ishaq Dar that was passed by the House with majority in clause by clause reading. The passage of the Finance Bill has successfully brought to an end the budgetary process started on June 3 with the budget speech of the finance minister at the National Assembly.

The bill now will go to the President for assent who will sign it into law making it will be applicable from July 1 2014. The House echoed with desk thumping as the House passed the budget in presence of Prime Minister Muhammad Nawaz Sharif who also witnessed the budget s passage.

The Senate had made 133 recommendations out of those the government accepted 57 and were incorporated in the federal budget full or partially. Once signed into law, the bill will increase monthly stipend from Rs 1,000 to Rs 1,500 billion for those receiving income support and number of families for the Benazir Income Support programme will be increased from 4.1 million to 5.3 million.

The crop insurance will be increased to 25 acres and prices of fertilizers will be reduced by Rs 300 per bag. The bill will also help reduce GADC to Rs 100 on power zero on cement Rs 150 on general industry Rs 200 on captive power and zero on commercial sector.

The government will also impose uniformed income tax of 4 percent on first class air travel and reduce sales tax on solvent extractors from 17 to 16 percent. The government will withdraw the exemptions of Rs 103 billion under its endeavor for phased elimination of SROs aimed at favoring influential ones.

The Finance Bill also provides a special package of Rs 36 billion for all provinces out of that Balochsitan will get Rs 14 billion, Sindh Rs 8 billion, Khyber Pukhtunkhwa Rs 4 billion, FATA Rs 4 billion, AJK Rs 3 billion and Gilgit Baltistan Rs 2 billion.

As part of the budgetary approval, the House has also approved demands for grants worth Rs 2.6 trillion besides charged expenditures. Following the passage of the budget, the finance minister felicitated the National Assembly Senate and the whole nation on approval of the budget saying the government was committed to take the country to its bright future as per vision of founder of the nation Quid-e-Azam Muhammad Ali Jinnah.

He informed National Assembly that the country s foreign currency reserves had reached to US 14.2 billion. He said that due to its prudent policies the government had managed to cross 14 billion mark and in future it would continue taking steps for further improving foreign currency reserves.

Finance Ministry clarifies SECP, CCP report

The Ministry of Finance and Economic Affairs has clarified a news published in The News, ‘SECP, CCP excluded from the purview of Federal Commission for Selection of Heads of Public Sector Organizations’ that in line with the judgment of the Honourable Supreme Court of Pakistan, the Federal Government shall make appointments to statutory positions in Securities and Exchange Commission of Pakistan (SECP) and Competition Commission of Pakistan (CCP) strictly under the laid down Rules in a credible and transparent manner.

The appointments in SECP and CCP will be made under the respective laws and judgment of Supreme Court of Pakistan and Rules/Regulations framed for the purpose.

The selection will be made competitively through inviting applications from the eligible candidates and short listed candidates will be interviewed and finally selected by the committee headed by the Finance Minister and comprising representatives of Finance and Establishment Divisions, the spokesman has concluded.

Javed Mirza adds that The News is in possession of the notification that excludes SECP and CCP from the purview of Federal Commission for Selection of Heads of Public Sector Organizations.Moreover, if a transparent and fair process had to be followed, the above-mentioned notification cannot be justified.

As the spokesperson of the ministry notes that a committee headed by the finance minister and comprising representatives of Finance and Establishment Division would be selecting the heads of these two institutions only; this would tantamount to discrimination with the other institutions or the government is not happy with the process carried on by the Federal Commission for Selection of Heads of Public Sector Organizations pertaining to CCP and SECP.

Finance Minister calls on Army Chief

RAWALPINDI: Finance Minister Ishaq Dar Saturday called on Chief of Army Staff (COAS), Gen. Raheel Sharif and discussed issues related to development programme of Pakistan Army.
According to ISPR, the Finance Minister said that present government accords topmost priority to national security and shall provide every possible assistance to the armed forces so that they can carry out their assigned mission of defending the motherland.

Finance Minister chairs meeting to roll out preparation of next budget

ISLAMABAD: Finance Minister Senator Mohammad Ishaq Dar on Friday chaired a meeting to roll out the preparation of next year's Budget at the Finance Ministry here.
Dr. Waqar Masood, Finance Secretary gave a detailed presentation on the next budget.
The Finance Minister expressed satisfaction on fiscal results for the first eight months of the current year which showed a deficit of 3.2pc as compared to the proportionate target up to February of 3.5%.
He stressed the need for continued vigilance on expenditure in line with revenue receipts so that the budgetary targets are achieved without fail.
Commenting on the preparatory exercise presented in the meeting, the Finance Minister emphasized that austerity will continue to remain the hallmark of PML-N's budget strategy and fiscal management.
He further underlined the need for clear and meaningful indications of budgetary ceilings to all federal ministries and for Public Sector Development Programme (PSDP) so that they can prioritize and formulate their expenditure proposals well in time.