Rs 20bn market support fund in next two days: Tarin

[Naveed Yaseen]

KARACHI (updated on: October 31, 2008, 18:52 PST): Advisor to the Prime Minister on Finance Shaukat Tarin said Friday that Rs 20 billion stock market stabilisation fund will be launched in the next couple of days and much before the removal of flooring.

Addressing the members of Karachi Stock Exchange (KSE), he said that NIT is managing the fund which has four shareholders having an investment of Rs 5 billion each. They are National Investment Trust (NIT), National Bank of Pakistan (NBP), State Life Insurance (SLIC) and Employees Old-age Benefit Institute (EOBI).

He said the government will provide a guarantee to them that they will not lose value of their money. We do not force these institutions to form up a fund. We are doing this for the government itself because we are buying government's scrips.

"We have decided to make a bouquet of these scrips and sell the fund to non-resident Pakistanis. This will convert rupee into dollars and serve as an investment instrument to overseas Pakistanis, he added.

Shaukat Tarin made it very clear that first of all small investors will benefit from this fund followed by other players in the market. NIT will handle this fund very, very professionally, he observed.

However, he categorically said the removal of flooring was a total discretion of KSE board of directors and the government will not interfere in this affair. "You have to decide when you want to remove the floor on 100-Index and not me", he maintained.

He said the stock market serves as the barometer of any economy and the government will take care of the interest of its stake-holders. "Your interest will be taken care off."

Referring to the fears of business community about the future of the economy, PM's Advisor on Finance said the government will stabilise some macro economic indicators by improving liquidity and foreign exchange reserves to boost the confidence.

However, the Advisor suggested that nobody should tamper with the market. "Markets go up and markets go down. It is a "tough luck" when your bet goes down and it is "good luck" when your bet goes up. It is the part of the market. Once you tamper it you are, in fact, tampering with your reputation."

He said in his opinion, the putting up of flooring has not done much good to their reputation.

Tarin said that from now on the country will move with production-led growth and focus on productive areas of the economy which are agriculture and manufacturing and trade.

We have not focussed on agriculture sector in an organised manner and therefore agriculture growth has been falling by one percent every decade and we are currently having under 2-percent growth, the Prime Minister's Finance Advisor said.

"This is unfortunate, because two-third of our population lives in rural areas, while its share in GDP is 20 percent. As a result we are importing food", the PM's Advisor observed.

Similarly, the growth rate in manufacturing sector is negative, 3.8 percent in the first quarter of current fiscal. Last year too, this sector grew at 3.5 percent. "We need to look at the reasons whether it is high cost of doing business or fragmentation."

"We have to tackle all this to ensure a sustainable growth rate in our industry. We have to make all our industry competitive so that it can compete in the international market as well as have a defence against imports", he said.

Tarin said once the industry is competitive, the country will have a balance in its trade.

He pointed out that the country needs to have an integrated energy plan so that there is uniformity in tariff and investors feel that there is a fair market based system.

This plan should also look at how coal, alternate energy sources and hydel energy is utilised, he said and added that human resource should also be developed by focusing it.

Talking of financial market, Tarin said the banks need to cater to the needs of all stakeholder, offer new product and they must expand their reach.

Besides, we need to develop debt market and expand capacity of stock exchanges in terms of more products, more sophistication and more investors and the government must help the investors in this regard.

The government has taken a lead by establishing a "yield curve" through a regular auction of Pakistan Investment Bonds and long term paper auction, the PM's Advisor onFinance said.

He said Planning Commission is being restructured and strengthened and it will devise future policies in consultation with all stakeholders.

Responding to a question about IMF's conditionalities, the Advisor said inflation has to be brought down to enable the economy to grow on a sustainable basis.

"If headline inflation is 25 percent and core inflation is at 17 percent then nothing is going to be competitive in the country including the manufacturing sector. We will do whatever we can to

bring down inflation in the country", he noted.

He said the IMF was buying whatever Pakistan was telling them. "It is a homegrown plan. We are not trying to inflict any more pain than necessary. I assure you that we will not take any step which is not necessary," he maintained.

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