Ranging from the question of expansion in the national economy, industrialisation, employment, revenue generation, privatisation, borrowing through issuance of papers and prices of daily use articles to prudential application of analytical tools for understanding the mechanics of financial policies for different situation, Khan defended the parameters within which the national economy is being pursued.
He said that the burden of price differential in the international oil market has partly been passed on to the people. The policy is to try to minimise the burden of rising oil prices on to the consumers. For seven months from May 2004 oil prices remained frozen despite persistent increase in the international market. For seven and a half months "we did not increase the prices but a little bit of the burden is now passed on to the people."
Dr Ashfaq said that after seven months we realised that price-increase was not a temporary phenomenon and it would continue to go up. So, he added, "we started to pass on a fraction of increase to the consumers."
The adviser said when the prices in the international market increased by about 57 percent, the government increased it only by 23 percent and that too in bits and pieces. Hence, the entire burden was not passed on to the consumers, he said.
Dr Ashfaq said that in India the prices of POL are high and the government has passed on the entire burden to the people, whereas in Pakistan the case is different.
He said that to absorb the entire burden of price increase would mean applying cuts in development expenditure and allocation to provinces. "This we do not want to do," he emphatically said.
Dr Ashfaq said that Pakistan's economic progress was on the right track and making it grow by seven or eight percent, there would be a need to invest about 22 percent of the GDP.
He said that every developing country wants to grow at much faster pace. When an economy like Pakistan wants to grow at very high rate of seven percent or eight percent, it requires investment of roughly around 21 /22 percent of the GDP.
The adviser said that direct foreign investment (DFI) of even about one or 1.5 percent of the GDP would be enough to accelerate the economy.
He said that Pakistan was still an under-taxed country and those who are already in the tax net are being squeezed. "We would have to enlarge the tax net to provide some relief to the already taxed people."
About relief to fertiliser industry, Dr Ashfaq said that only about two years ago Pakistan was a fertiliser-exporting country and now its domestic needs have increased. "We now import fertiliser," he added.
He said that more lands are being brought under cultivation and farmers have liquidity, whereas the industry has not grown to supply them as much seeds and fertiliser.
"We have received request for natural gas to be used in fertiliser sector expansion but due to its shortage it can not be done at this stage. The natural gas would be one of the means to cut down price of fertiliser but this is not possible at the moment," he added.
He said that there was a time when the government imported urea at Rs 1200 per 40-kg bag and supplied the same to farmers at Rs 450.
When asked what would happen after the process of privatisation is over and need to increase tax rate comes up to meet such requirement which were being met now from the privatisation proceeds, Dr Ashfaq said, "Privatisation proceeds helped reduce the debt of the country and helped reduce fiscal deficit of the country. Rather, it was used to finance the fiscal deficit of the country."
He said that through privatisation the government has not handed over the entire assets of the OGDC, PPL SSGC and other units. With the induction of private sector the efficiency of these units would increase and profit would go up. The government would get its share as well. This would be much more than what we were getting earlier. "Therefore even after privatisation the government would get enough."
About a question regarding provision of gas to three new power projects based on gas and ignoring fertiliser industry, he said that as soon as we had availability of gas we have priority areas like fertiliser and electricity.
To a question, Dr Ashfaq said that investment in recent years has increased substantially.
He said that private sector has to take the leading role and public sector has to provide facility.
The adviser said that this year there was massive upsurge in private sector investment. "During the last 20 years private sector had borrowed Rs 650 billion as against Rs 583 billion combined borrowing from the banking system during last 96 months." There are many plans of business and industry expansion in cement, automobile, steel, etc that indicated the rising trend of investment.
Regarding Pakistan Investment Bond (PIB), he said that the PIB was a source of government borrowing from the banking system. Our fiscal position is very strong therefore there is no more immediate need for borrowing through this instrument.
To question, Dr Ashfaq said that so far he has not seen the desired level of investment in the automobile industry, of the magnitude, which would give the indication that the waiting period would be reduced. "I have been asking the auto manufacturers that the persistent excess demand was not in their own interest. So they have to increase their capacity. I would like to see their commitment through investment, I would be convinced that they are really making efforts in reducing this demand-supply gap."