ISLAMABAD - Suggesting for power tariff rationalisation, the Asian Development Bank on Thursday said that it would support the Diamer Bhasha Dam project and would work with Pakistan to see how it can be structured in a technical manner.

Klaus Gerhacusser, DG Central West Asia Department of ADB, shared these view with Finance Minister Senator Ishaq Dar. He lauded the efforts of the new government for its comprehensive measures to address the challenges faced by Pakistan’s economy in a short span of time.

Klaus said that the approval of the IMF programme in September, 2013 by its Board will send a good signal to the market and the financial world. The DG said that ADB is encouraged by the measures taken by the government to settle the circular debt and suggested to bring about tariff rationalisation which according to him will be very important for the viability of the power sector.

In response to the finance minister’s desire that Pakistan wants to prioritize the Diamer Bhasha project and work with ADB to as early as possible, the DG said, ADB would support it and would work with the government to see how it can be structured in a technical manner.

Reiterating the support of ADB for the measures taken by the new government, the DG ADB expressed the confidence that these would show results in the years to come and would be sustainable. Klaus said that ADB was prepared to discuss the country programme with the new government in Pakistan and align it with its priorities.

Earlier, Senator Ishaq Dar, in his opening remarks, welcomed the ADB delegation and presented an overview of the economic situation of the country. The Finance Minister said that the new government had introduced structural reforms with the objective of stabilizing the economy and increasing the growth rate.

The finance minister said that gravity of the economic situation and the enormity of the challenge faced by the new government can be gauged by the fact that public debt had soared to Rs.14.5 trillion from 3 trillion in 1999, debt to GDP ratio had increased to 63.5%, fiscal deficit to 8.8% and growth rate stood at a meager 3.6%.

This was a grave and untenable situation. The government had to take some unpopular decisions to address the economic challenges. “We owe it to our country and for the betterment of its future”, he added.

Senator Ishaq Dar said that he had worked in a similar situation in 1998 when Pakistan was subjected to sanctions because of nuclear tests. The size and depth of the present economic imbalances are much deeper as compared to 1998, he added. But stabilization measures and structural reforms already put in place would move country in a positive direction, he added.

Dilating on the measures taken by the government, Senator Ishaq Dar said that a 30% cut has been made on non-development expenditures, the Prime Minister’s discretionary fund which had reached Rs.42 billion has been abolished, all secret service funds except for two national security agencies and the discretionary fund of the ministers have been abolished and cut of 40% has been made on the budget of the Prime Minister’s Office and secretariat.

To address the huge unemployment and inflation problem in the country, the finance minister said that the allocation for income support programme has been increased from Rs.40 billion to Rs.75 billion. Besides, the Federal Public Sector Development Programme has been increased by 50% and the total public sector outlay including those earmarked by the provinces now stood at Rs.1.15 trillion.

The circular debt which stood at Rs.503 billion has been virtually cleared except for Rs.23 billion which are under litigation.

Senator Ishaq Dar said the government has concluded a programme with IMF and has requested for 500% of its quota.

Senator Ishaq Dar said that the government would come out with an energy policy which will envisage change in the present skewed energy mix, generate power from low-cost fuel, come hard on electricity theft and improved governance.

On the revenue side, the government has set an ambitious target of Rs.2475 billion which would be achieved by widening of tax-base, plugging of pilferages and good governance Dar said that the debt to GDP ratio would be decreased by 2% every year while the fiscal deficit would be brought down to 4% within three years.