FINANCE MINISTER QAMAR SAYS BUDGET WILL BE ON TIME

C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 001916 SIPDIS E.O. 12958: DECL: 05/19/2018 TAGS: ECON EFIN EINV PGOV PREL PK SUBJECT: FINANCE MINISTER QAMAR SAYS BUDGET WILL BE ON TIME Classified by: Ambassador Anne W. Patterson for reasons 1.4 (b) and (d) REF: Islamabad 1900 Summary -------------- ¶1. (C) Summary: Ambassador met with Naveed Qamar, the Acting Minister of Finance, who has replaced Ishaq Dar after the Pakistan Muslim League-Nawaz (PML-N) Ministers tendered their resignations May ¶13. Qamar said that the budget would be prepared for the Parliament to debate and pass it by the June 30 fiscal year end. While spending will be less than last year and the GOP will seek to broaden the tax base, the new government will continue the private sector focus of the previous government. Coalition Support Fund reimbursements, a possible GOP investment conference in the U.S., resumption of the GOP privatization program, and Reconstruction Opportunity Zones (ROZs) were also discussed. End Summary. Finance and Privatization portfolio -------------- ¶2. (C) Ambassador and Economic Counselor (notetaker) met with Acting Minister of Finance Naveed Qamar May 19. Qamar assumed the Finance Minister portfolio when the PML-N Ministers tendered their resignations May 13. Qamar told the Ambassador that he was also responsible for investment and privatization issues, but not shipping and ports, part of his original ministerial portfolio. Qamar remarked that "we need all the help we can get." The Ambassador explained that the USG is trying to accelerate the Coalition Support Fund (CSF) reimbursement process so that the GOP will have the funds in its account before the June 30 end of the fiscal year. ¶3. (C) Ambassador raised the up-coming USD 61.29 million payment for the F-16 mid-life upgrade due June 15. The Minister was unaware of it. Private-sector friendly budget -------------- ¶4. (C) In response to Economic Counselor's question, Qamar said that the budget for Pakistan's 2008-2009 fiscal year would be investor-friendly, and that the major deviation from previous years would be to increase the tax base and "fiscal consolidation." Former Finance Minister Dar's May 12 speech (reftel) correctly laid out the policy direction, Qamar said. He also plans a series of incentive structures to increase agricultural production, but offered no details. ¶5. (C) On privatization, Qamar is "very cautious because of the Supreme Court decision" which stopped the Pakistan State Steel Mills privatization. A new privatization board had been named. Shares in Habib Bank will be sold, but the proposed convertible bond using Oil and Gas Company Limited (OGCL) shares as collateral will not be issued. In response to the Ambassador's question regarding privatization of the Pakistan Airlines-owned Roosevelt Hotel in New York, Qamar replied that the GOP will not sell it immediately because they will not get an amount that is justifiable in the public eye since U.S. taxes will constitute half the proceeds. He said that the estimates of the likely sale price are wildly exaggerated. ROZs -------------- ¶6. (C) Qamar asked for an update on the Reconstruction Opportunity Zones (ROZ) legislation. The Ambassador explained that we were waiting for legislation to be introduced in the House of Representatives. Econ Counselor stressed the importance of GOP preparations to develop an incentive structure and consider possible ROZs in advance of the legislation's passage. Qamar promised to coordinate ROZ preparations with the Ministers of Commerce and Industry. Investment conference -------------- ¶7. (C) Ambassador again offered to be of assistance in organizing a Pakistan investment conference in the U.S. Econ Counselor added that a number of investment conferences focusing on the energy sector are ISLAMABAD 00001916 002 OF 002 being planned over the next six months, and it would be helpful to have a single point of contact. Qamar promised a response shortly. Comment -------------- ¶8. (C) Comment: Qamar has assumed one of the most challenging portfolios, and is still learning. He is, however, well-qualified for the job with an MBA from California State University and previous service as Minister for Privatization and as a Member of the National Assembly. However, he will be hard-pressed to put together a budget before the traditional early June launch. End comment. PATTERSON