Not single dollar received from 'Friends of Democratic Pakistan'

[Naveed Yaseen]

Tarin hopeful of getting $500 million by December from the $5.5 billion pledges made in April at Tokyo moot

Saturday, October 31, 2009
By Aftab Maken

ISLAMABAD: The economic miseries of the incumbent regime have aggravated after zero response from the Friends of Pakistan (FoDP), who had pledged $5.513 billion at the Tokyo conference and it is feared that the government would have to slash the development budget.

“The FoDP have virtually left Islamabad in the lurch as it has become difficult for the economic managers to run the country within the budget outlay for 2009-10 as the budget was prepared keeping in view the expected inflows from FoDP,” a senior official of the Finance Ministry said on Friday.

The country, which is at war with terrorists and fighting for the safety of the whole world, has been compelled to reduce its development budget, which will increase poverty. And this could further fuel terrorism in the country.

The PPP-led coalition government would find it difficult to meet the set fiscal deficit target of 4.7 per cent of GDP as Tokyo pledges announced for the budgetary support of Pakistan had not materialised, official sources confided to The News on Friday.

“Not a single dollar has been disbursed to Pakistan as billion dollars’ pledges have not transformed into commitment,” an official of the Economic Affairs Division (EAD) familiar with the development told this correspondent but requested not to be named.

When asked to comment on the issue, Finance Minister Shaukat Tarin said: “We are hopeful that Pakistan will get 500-600 million dollars by the end of second quarter of the current fiscal year.”

Tarin was also hopeful that Pakistan would get the required amount from the FoDP in the first quarter but Islamabad was forced to move the IMF to bridge the $400 million gap because of no response from “the friends.”

The central bank in its first quarterly report finally admitted that the painfully slow pace of materialisation of the FoDP pledges, which is severely constraining the budgetary position, is hampering the government’s efforts to reflate the economy through fiscal stimulus.

The central bank report also highlighted the marked improvement in investor sentiment, but the recent spate of high-profile terror attacks across the country threatens to interrupt the continuation of the turnaround.

The fiscal deficit in the first quarter of FY 2009-10 was recorded at 1.5 per cent of GDP against the set target of 1.3 per cent of GDP due to revenue shortfall and excessive borrowing.

The State Bank report shows that the programme did help in contracting fiscal and current account deficit. Fiscal deficit dropped to Rs680.4 billion during fiscal 2008-09 from Rs777.2 billion in the preceding year. That was achieved in part by doing away with energy-related subsidies.

However, the SBP said, the government’s move to cut development expenditure was less welcoming as it badly affected the construction-related industries. For the current fiscal year, the SBP has projected the fiscal and current account deficits to remain between 4.7 per cent and 5.2 per cent of GDP. Last year, the two deficits were 5.2 per cent and 5.3 per cent, respectively.

The multilateral donors along with 18 friendly countries had announced $5.513 billion at the donors held in Tokyo on April 17, 2009 and the funding mode was meant for budgetary support, project finance, trade finance, etc.

Out of these $5.513 billion pledges, Japan and the USA had announced pledges of one billion dollars each while Australia had offered $300m, the European Commission $96m, France $264m, Germany $125m, Iran $330m, IDB $250m, Italy $86m, Kuwait Fund $49m, Netherlands $121m, New Zealand $0.58m, Korea $200m, Saudi Arabia Fund $700m, Spain $27m, Sweden $5m, Turkey $100m, the UAE Fund $300m, the ADB $300 and the World Bank $300m, says an official paper available with The News.

http://www.thenews.com.pk/daily_detail.asp?id=205995