We expect remittances to touch $15 billion mark this year,' Advisor, Ministry of Finance

November 29, 2013

BR Research this week caught up with the "straight-shooting" Finance Rana "ssa# "min an# in$uire# about things on the %isca& %ront' Follo in! are some excerpts from that sit"do n#

inistr! "#visor

BR Research( )ow #o !ou see the %isca& #e%icit picture in coming months* Rana "ssa# "min( +hings are going ver! we&& on that %ront' ,ou wi&& not hear cries o% %inancia& strangu&ation %rom an! ministr! or #ivision' +hat is because the Fe#era& -overnment has a&rea#! cut the bu#get b! 30 percent across the boar#, which is unprece#ente#' +hanks to the resu&ting savings o% about Rs.0-./ bi&&ion, the %irst $uarter %isca& #e%icit was recor#e# at 1'1 percent o% -01 an# the %our-month #e%icit was 1'2 percent o% -01' 3e are on track' 3e #on4t %ee& the nee# to cut e5pen#itures an! %urther' "n# neither #o we want to' 6ur e5pectation is to c&ose the %isca& #e%icit aroun# 2 percent b! the en# o% this %isca& !ear' BRR( +hen, how #o !ou e5p&ain the s&ow pace o% 1701 #isbursements so %ar* 8t gives an impression that the Rs/.0 bi&&ion is #e&iberate&! being kept un#er-%un#e# to rein in the %isca& #e%icit* R"( +here are man! reasons %or s&ow 1701 #isbursements' For one, the 1701 bu#get was put together in &ess than a week4s time a%ter the new government took over' "t that time, the 9:N9: ha# #eci#e# that the new : s wou&# &ater on revisit the pro;ects an# a&&ocations as per their own priorities' +hat prioritisation took a&most a month' 7econ#&!, the %un#s #isbursement #epen#s on the pace o% spen#ing at the ministries an# #ivisions' +hir#&!, 1&anning :ommission is a&so taking its #ue time to %ina&ise pro;ects o% the new government' 7o, it4s not true that %un#s are not avai&ab&e' +he %un#s are there' 8 must a## here that we #o not inten# to s&ash the 1701 bu#get this !ear, not at a&&' +he bu#get wi&& sta! at Rs/.0 bi&&ion' )owever, we ha# announce# in the bu#get that Rs11/ worth o% #isbursements in

the %ina& $uarter wi&& #epen# on FBR4s revenue co&&ections' +he! are both &inke#' BRR( 7o, how are the revenue co&&ections coming a&ong* R"( FBR has been per%orming we&& this !ear' 8t has showe# 1< percent growth in revenue co&&ections #uring the =u&!-6ctober perio#, compare# to 3 percent in the same perio# o% &ast !ear' +his growth is #espite the short%a&&s in customs co&&ections #ue to s&ow#own in both vo&ume an# va&ue o% tra#e' 6therwise, revenue growth wou&# have average# at 1>'/ percent per month' BRR( 8sn4t the FBR revenue target--which sees a growth o% 2<-2> percent--a bit over optimistic* R"( 8t ma! be over optimistic, but it has to be achieve#' 3e know that co&&ections ma! go #own temporari&!, but the! wi&& pick up in subse$uent $uarters' ?er! soon the government wi&& a&so announce some incentives, which wi&& he&p in increasing the co&&ections' 3e be&ieve that this target is achievab&e' "n# there is working behin# it' For instance, -7+ was raise# in the bu#get to 1< percent %rom 12 percent--that wi&& straightawa! provi#e Rs./-/0 bi&&ion in a##itiona& revenues' ore revenue wi&& come %rom the upwar# revision in high-income sa&ar! brackets' Both #irect ta5es an# sa&es ta5 are showing growth' BRR( 3h! are the non-ta5 revenues not showing progress* R"( +hat4s not the case' 3e have co&&ecte# non-ta5 revenues o% Rs.00 bi&&ion in the =u&!6ctober perio#, which is .2 percent o% tota& co&&ections' 3e have receive# pen#ing :7F #ues in this $uarter' 9%%orts are being ma#e at the top &eve& to get the &ong-pen#ing #ues %rom 9tisa&at re&ease# within this %isca& !ear' +he 3- spectrum auction is going as per the p&an, an# we are con%i#ent to conc&u#e a transparent transaction b! arch' Besi#es, thanks to the 8 F %aci&it!, bu#getar! support ta&ks @#i%%erent %rom pro;ect ai#A are at an a#vance# stage with the 3or&# Bank an# "sian 0eve&opment Bank' 3e are e5pecting B/00 mi&&ion %rom each o% these sources' BRR( 3hat is the out&ook %or the e5terna& %inancia& in%&ows* R"( +he Finance inister has been active&! engage# with the bi&atera& an# mu&ti&atera& %inancia& institutions' +hose e%%orts are bearing %ruit' For instance, the 3or&# Bank4s 8F: has increase# the grant to B1'/ bi&&ion instea# o% B/00 mi&&ion' C7 government4s 6verseas 1rivate 8nvestment :orporation has a&so raise# the amount to B3 bi&&ion instea# o% B1 bi&&ion' 3e are now &ooking to %&oat 6-0:D bon#s @at &east B/00 mi&&ionA in the market in the thir# $uarter' +hese things wi&& he&p us re#uce our #epen#ence on commercia& borrowing'

BRR( For how &ong #o !ou think #omestic #ebt servicing wi&& remain skewe# towar#s short-term #ebt* R"( 6nce there is macroeconomic stabi&it!, commercia& banks wi&& go towar#s &ong-term investments' 3e are in the mi#st o% a stabi&isation perio#, which can take up to 3 !ears, which means short-term-ism wi&& sta!' 8t suits the government to have a ro&&over time%rame o% at &east one !ear, but that4s not happening right now because bankers are &ooking at short term #ue to #iscount rate movement an# in%&ation' BRR( 3hat are the reasons behin# recent s&ow#own in #eposit mobi&isation at the Nationa& 7aving 7chemes* R"( 8 be&ieve that cou&# be %or two reasons( First, there has been uncertaint! surroun#ing the hea# o% N77 whose term has e5pire# an# the new #irector genera& is !et to be appointe#' +hat has a%%ecte# the organisation4s #eposit mobi&isation e%%orts' Besi#es, aroun# 900 positions a&so &ie vacant at the Nationa& 7avings 0irectorate' 7econ#&!, the one-month #e&a! in #iscount rate revision ma! a&so have been at work here, which &e# to investors an# #epositors awa! %rom the N77 towar#s the banks' BRR( 8s there an! progress on the government4s privatisation p&ans* R"( 3e have a&rea#! #e&ivere# a p&an to privatise 31 179s, on which work is un#erwa!' "nother 30-3/ entities have to be i#enti%ie# b! 0ecember en#' 3e are targeting the &owhanging %ruits %irst among others in the 31 179s' 8n a %ew weeks, !ou wi&& hear about the stock #isinvestment o% 6-0:, E"1:6, a coup&e o% 087:6s, an# a %ew banks' +hese things are on track' BRR( :an !ou p&ease e5p&ain the resur%acing o% circu&ar #ebt* R"( :ircu&ar #ebt wi&& a&wa!s remain because it is base# on receivab&es' 6ut o% the Rs1<0 bi&&ion o% its accumu&ation now, on&! Rs100 bi&&ion are receivab&es' "bout Rs2022 bi&&ion is #ue to tari%% #i%%erentia& subsi#!, which we have now re&ease#' 7imi&ar&!, there are %ue& a#;ustment pa!ments, which have to be ma#e over a perio# o% months' 1rovincia& governments a&so owe mone!, which we hope to arrange through %e#era& a#;uster, a%ter agreement between center an# provinces' BRR( 3hat is !our rea#ing on overseas remittance in%&ows* R"( 3e are e5pecting the !ear-en# in%&ows to touch B1/ bi&&ion mark' 1R8 p&us wi&& be announce# soon, which wi&& inc&u#e more " D-comp&iant e5change companies' BRR( 3h! is the Finance inistr! using C7F mone! %or its own nee#s*

R"( +hat is an incorrect impression' 8t4s their mone!, we can4t use it' 8t is ;ust that that mone! has been move# %rom the NB1 to 7B1' +he %un#s are sti&& at the C7F #isposa&, %or their e5pen#itures' 3henever the! want, we re&ease the mone!'