Finance Minister Shaukat Tarin has said that the government plans to boost spending on large infrastructure projects by as much as 40 per cent to create jobs and foster productivity in an economy crippled by the coronavirus pandemic.
In an interview with Bloomberg, Tarin, who took office last month, said that the federal government will earmark as much as Rs900 billion ($6 billion) for development expenditure in the year beginning July. The economy needs to expand by 5 per cent next year, he said.
“That’s the bare minimum we need for a country this size,” said Tarin, who is due to present a new budget next month for the world’s fifth most-populous nation. “There are almost 110 million youth.”
Tarin, a former banker, was appointed last month as the fourth finance minister since Prime Minister Imran Khan’s government took power in 2018. He also served in the role between 2008 and 2010, helping the nation avoid default by securing a bailout from the International Monetary Fund. He comes into office as Pakistan faces a third wave of coronavirus cases, prompting authorities to order a week-long shutdown that may weigh on economic activity and hurt incomes.
Tarin’s plan will reverse his predecessor’s decision to lower spending to narrow the budget deficit, which he estimates to be a little above 7 per cent of gross domestic product in the current fiscal year through June, against 8.1 per cent in the previous year. Tarin said that he expects the deficit in the next fiscal to be 1 or 1.5 percentage points lower.
While balancing the budget will be key for Pakistan’s current $6 billion loan program with the International Monetary Fund (IMF), the new finance minister is negotiating with the organisation for more wriggle room to support economic growth.
The government’s GDP target for next year is a percentage point higher than the IMF’s 4 per cent projection, and Tarin is seeking to boost growth to 6 per cent in the year after. The Washington-based lender sees the economy expanding 1.5 per cent in the current fiscal period after a rare contraction last year.
“We need 2 million jobs every year,” he said. “If we do not go into growth mode, we will have a major crisis on the streets.”
The central bank, which has cut interest rates to a three-year low to support the economy, has been on pause mode for a while and has left some of the heavy lifting to the government.
“First we have to get more revenues,” Tarin said, adding that he’s targeting about 6 trillion rupees next year in tax authority revenue, compared with this year’s 4.75 trillion-rupee target. “Unless we get more revenues, forget about any incentives to boost the economy.”