ISLAMABAD: Pakistan has not received any additional financial benefit from the debt relief provided by the Group of 20 (G-20) nations, Planning Minister Asad Umar said on Monday, but admitted that in the given circumstances, it was the right decision.
“In any uncertainty, it is the right thing to do otherwise there is no financial benefit of the G-20 relief,” the planning minister said while addressing his first post-budget news conference.
He said that Pakistan would also have to pay interest for one-and-a-half-year period when it will not be servicing its debt.
The minister also said that the government will introduce a new legislation to give legal cover to the China-Pakistan Economic Corridor (CPEC) Authority after the ad-hoc legislation lapsed a few days ago.
Umar sought provincial contributions to end deprivation of the people living in erstwhile Federally Administered Tribal Areas (Fata), now merged with Khyber-Pakhtunkhwa (K-P).
To a question whether it was worth the effort to seek debt relief from G-20 nations with no real gains, Umar said that there was an extensive debate and “the arguments were both in favour and against” seeking the relief.
Had Pakistan not sought deferral, it would have had to borrow additional loans to service the maturing debt, said Umar, who is the first finance minister of the PTI government (August-April 2018-19).
Pakistan owes $20.7 billion to 11 members of the G-20 rich nations. Of this sum, an amount of $1.8 billion would mature by December 2020, including the interest payments, according to the Ministry of Economic Affairs.
On April 15, the G-20 nations announced a freeze on debt repayments from 76 countries, including Pakistan, during May to December 2020, subject to the condition that each country would make a formal request. The relief was aimed at providing fiscal space for spending on Covid-19 related mitigation measures.
However, one of the eligibility criteria was that the beneficiary country would not “contract new non-concessional debt during the suspension period, other than the agreements under this initiative or in compliance with limits agreed under the IMF Debt Limit Policy (DLP) or WBG policy on non-concessional borrowing”.
In these eight months, Pakistan will have to make $1.8 billion repayments to its 11 members. This includes $1.47 billion principal loans repayments and $323 million interest on loans.
On development spending, Umar said that as against Rs701 billion original budget, the government expects actual spending at Rs530 billion by June-end, adding that of Rs701 billion, the planning ministry-administered PSDP was Rs550 billion.
“Against our share, we would spend Rs444 billion in this fiscal year, which is equal to 80% despite lockdown that affected spending in the last quarter,” the minister said.
The development spending got a boost after Umar became the planning minister in November last year.
Umar said that the PTI government has significantly increased the budgetary allocations for social sector, earmarking 38% of the proposed budget as against 29% allocation in the current fiscal.
The government has a plan to spend Rs70 billion on coronavirus mitigation-related activities and short-term employment generation, the minister said, adding that this money will be spent in collaboration with the provinces.
Umar said that the Rs70 billion allocation can be used to upgrade the district headquarter hospitals that will also ease the burden on hospitals in the big cities that are witnessing increasing numbers of Covid-19 patients.
The minister also urged the provinces to contribute to the erstwhile Fata development package, as per commitments given by the national leadership after its merger with K-P.
In the next fiscal year, Rs60 billion is the estimated spending in merged districts and the federal government has allocated 40% of its share, he added, asking the provinces to pick their shares as per the National Finance Commission Award formula.
“If we did not address the deprivations of the people of the erstwhile Fata region, the whole nation will suffer as enemy forces are active in these areas to cultivate people”, the minister warned.
He said that the government also made significant budgetary allocations for completing work on Karachi projects, including the Karachi Circular Railway and the Green Line.
In the next fiscal, Rs77 billion allocation has been made for CPEC projects, the minister said. The Zhob-Kuchlak road project, Yarik-Zhob project and Burhan-Hakla road will receive budgets in the next fiscal year.
“The ML-I is the CPEC highlight for next year and groundwork on the project will begin by April next year,” said Umar.
To a question about allocating only Rs6 billion for ML-I project, the minister said that the Chinese share will be taken into account after finalising the financing details.
The total cost of the project is $7.2 billion or Rs1.12 trillion, which will be completed in nine years.
To a question about the fate of the CPEC Authority, the minister said that the government will introduce a new legislation after the CPEC Authority Ordinance lapsed about 10 days ago.
“There is no legal vacuum, as the Cabinet Committee on CPEC is fully functioning to take care of the corridor,” the minister said.
The minister said that in the next fiscal year, the groundwork on three mega dam projects – Diamer Bhasha dam, Mohmand Dam and Dasu hdyrpower power project – will begin. These three projects have the capacity to generate 7,460 megawatts of electricity and water storage capacity will be increased by 80%.