ISLAMABAD, June 12: Describing the budget as a “major stabilisation effort” to remove fiscal imbalances, Finance Minister Syed Naveed Qamar said on Thursday that all subsidies on fuel oil, fertiliser and electricity would be gradually withdrawn to curb the rising external account deficit.

Defending the budget at a news conference, he said the subsidies would be significantly reduced from July 1 to achieve the much-needed macro-economic stability and ensure financial discipline. He claimed full support of the PML-N in the preparation and announcement of the budget.

However, he conceded that there would be a lot of impact of indirect taxes on consumers.

He said the 20 per cent increase in the salary of government employees would be on the running basic pay, besides increase in various allowances.

Mr Qamar said that the rising food inflation was a global phenomenon and the government could hardly do anything about it, adding that whenever there would be an increase in oil prices in the international market, Pakistan would have to pass on the burden to consumers.

The minister evaded answering a question about a likely increase in power and gas tariffs. He only said there were speculations so many things and he would not like talk about them on every forum.

He said there were serious inflationary pressures which needed to be addressed by curtailing government borrowings from the State Bank, adding that other non-traditional means were being explored to seek necessary borrowings for the government.

He said that various modes, including that of National Savings and privatisation proceeds, would be utilised to bring down the fiscal deficit to 4.7 per cent of GDP.Mr Qamar pointed out that the government would continue to support tight monetary policy of the State Bank to control inflationary pressures.

He told a reporter that the government did not impose capital gains tax on stock exchanges because it could send wrong signals to market forces. He said volumes would have shrunk further had the government decided to impose the tax on stock exchanges.

In reply to a question, the minister said the National Accountability Bureau (NAB) might be wound up because it had been used as a “political tool” to victimise people. However, he said it was difficult to immediately disband the bureau which was protected by the 6th schedule of the Constitution.

He said that an alternative accountability system would be introduced by strengthening the office of the Accountant General of Pakistan and the Public Account Committee (PAC) of the National Assembly. “The objective is to ensure fair accountability and no witch-hunt.”

In reply to another question, he said that as soon as nominations from the remaining two provinces were received, the new National Finance Commission (NFC) would be constituted to enhance the share of the federating units in funds.

The minister admitted that small loans to people were being offered on as high as 28 per cent interest, but said the State Bank was asking macro-economic institutions to provide such loans to the needy people on lower mark-up.

He hinted at the possibility of increasing wheat support price from Rs625 per 40kg to Rs800 in the coming sowing season. When it was pointed out that the move might lead to an increase in inflation, the minister said the government would take the decision after taking into consideration all aspects of the issue.

He warned hoarders and black-marketers that they would be taken to task, as stated by the prime minister, if they did not stop hoarding essential commodities.

The finance minister said the government had no intention to change the existing privatisation policy which, according to him, had been started by the first PPP government in 1988. “We will introduce new portfolio of privatisation to earn good foreign exchange.”

When asked if the government had any plan to investigate dubious privatisation deals of the last government, Mr Qamar said there would be an ‘audit’ of all transactions.

He said that the problem of loadshedding would be solved by encouraging independent power producers (IPPs) to further invest in thermal power generation. He said that power plants would be acquired on rent to increase generation from the present 20,000MW to about 24,000MW.

“We are also focussing on starting other mega hydel projects, excluding Kalabagh dam,” he said, adding that Diamer-Bhasha dam, Neelum-Jhelum and other projects would be built to cope with power shortage and ensure sufficient water for agriculture.

He said the duty on import of expensive cars and luxury items had been increased to improve the balance of payment position.

He expressed the hope that the government would achieve 25 per cent growth in revenue from new taxes.

He pointed out that incentives had been given to manufacturing and agriculture sectors to enhance their production.

About the Saudi oil facility, the finance minister said that Pakistan had requested for it and would hopefully get it.

The finance minister said that Rs125 billion was expected to be collected from direct and indirect taxes and withholding and other taxes.

“This is very unfortunate. We have asked the HBFC and ZTBL to examine the possibility of not auctioning the houses of small loan-holders and farmers,” was the minister’s reply when he was informed that houses of people who could not repay HBFC loans were being auctioned while billions of rupees taken by the rich people from banks had been written off.

He said that initially 3.3 households had been selected for relief in the new budget which would be increased to five million households.

Asked why was the President House exempted from austerity measures, Mr Qamar said it was a voluntary exercise and could not be enforced. He said that since the annual spending of state institutions came under the charged expenditure, it had to be decided by the institutions themselves, including the President House, whether to curtail it. “The ministry of finance has no control over this issue”.

Mr Qamar said that the defence budget would be made transparent and its details would be placed before parliament. “It would be for the first time after 1965 that there will be no one-liner defence budget and that legislators would be provided an opportunity to talk about it in the house.”

However, he said there would be no compromise on country’s security and the armed forces would be provided all necessary resources.

He said that the PSDP funding approved by the National Economic Council (NEC) at Rs541 billion was ‘final’ and the figure of Rs549 given in the budget document would be corrected.

The finance minister said that the increase in the number of judges from 16 to 29 was a technical issue and was necessary to be shown in the new budget so as to have a budgetary provision for it during the next financial year.