Pakistan adopts tight monetary and fiscal policy for development projects – Research Snipers

Pakistan adopts tight monetary and fiscal policy for development projects

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The current government adopts tight monetary policy during the first six months of the current fiscal year due to development projects.

The government of Pakistan has only released Rs184.5 billion for Public Sector Development Programme (PSDP) during the last six months from July 2018 to December 21, 2018, releasing only 27 percent of the annual development budget in six months cycle according to planning commission. The government is well short of 23 percent in releasing cash indicating tight money supply policy.

From the total budget allocation of Rs800 billion the government has already sliced Rs675 billion for 2018-19 in order to overcome budget deficit. It was reported earlier that Finance Minister Asad Umar said that balance of payment crisis was over with Saudi aid to Pakistan. Most recently, UAE confirms $3 billion deposit in State Bank of Pakistan makes it more stable.

However, the government is still very cautious in releasing payments and slashing the development budgets massively, earlier this month the government also decided to slash the non-salary current budget by 10 percent, Economic Times reported.

While there is tight money spending going on FBR is also facing the shortfall in revenue collection, the tax collection shortfall reached Rs100 billion, The Nation reported.

According to the data released by planning commission Pakistan, Rs76.7 billion have been released so far to all 39 federal ministries during the last six months. The data also indicated the government has not released any funds for Federally Administered Tribal Areas (FATA). However, the government had Rs10 billion allocated for the region for 10-year development projects but the region is now being merged into KP provinces.

Similarly, the government has sliced the development budgets of Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (GB) from what was actually allocated to the areas.  

The tight monetary policy, fiscal policy and, exchange rates are impeding economic growth and escalating public debt according to a key Economic Advisory Council (EAC) member Ashfaq Hassan Khan, according to Tribune, he distanced himself from the current policies that are not in favor of short-term economic growth of the country.

The EAC member Ashfaq Khan argued that the tight fiscal policy was detrimental to public-sector spending, which would adversely affect this year’s economic growth. Many economists still see these moves as the preparation for the next IMF programme.