Saudi help to boost reserves this month: Ishaq Dar

ISLAMABAD: Terming the PTI’s white paper totally misleading, Federal Minister for Finance Ishaq Dar Wednesday said the Saudi financial assistance would boost the dwindling foreign exchange reserves during the current month.

Addressing a press conference here, he said the 9th and 10th reviews could be combined if the IMF agreed to it. Dar was flanked by Minister for Information Marriyum Aurangzeb, Minister for Power Khurram Dastgir, Minister for Planning Ahsan Iqbal, minister for economic affairs and members of the economic team.

The minister termed the ousted PTI-led government the worst-ever witnessed by the country. He said the PTI government was even worse than Yayha Khan’s regime on account of mismanagement.

The minister confirmed the government was considering Flood Levy to curtail imports and slap Windfall Gains Tax on the banking sector which earned profits through currency manipulation.

Dar said the government would generate additional resources to meet the flood expenditure requirements before seeking help from the international community.

“The friendly countries have announced their support which will help manage the forex reserves. Saudi Arabia’s financial assistance will beef up foreign exchange reserves. China’s commercial loan refinancing of $1.2 billion will be secured,” he said.

The finance minister said the IMF’s 9th and 10th reviews could be combined if the Fund agreed to it. “Our foreign exchange reserves will be in a much better position by June 30, 2023, as work on different transactions is underway,” Dar said.

He responded to different claims made by the PTI in its White Paper on the country’s economic situation to compare the performance during the tenure of PDM and PTI tenures.

Dar said the PMLN leadership preferred to give away political capital and saved the state when it was on the brink of collapse. He said it was quite strange that the FBR’s December target was higher than June whereby the FBR faced a shortfall mainly because of Super Tax estimated to generate Rs270 to Rs290 billion revenue that got stuck up in the Sindh High Court. He said the FBR’s collection stood at Rs3,645 billion in July-Dec period of the current fiscal year against Rs2,918 billion, registering a growth by 24.8 percent. Now the FBR’s annual tax collection target stands at Rs7,470 billion.

To a question about the revival of IMF program, he said the IMF had sought details of flood related expenditures and it was shared with them.

He said circular debt in both power and gas sector had crossed Rs4 trillion mark. Circular debt in the gas sector would be slashed down from Rs1,600 billion to Rs900 billion through a viable and transparent plan.

He said the government had paid back $2.25 billion debt repayment just in one week recently. “When the international bond’s payment was due, it was propagated that the country would seek a moratorium but it did not happen and all repayments on external debt and obligations were done on time,” he added.

He ruled out the possibility of default, arguing that when Pakistan exploded nuclear devices, the foreign exchange reserves had tumbled to $414 million in 1998 but they managed the economy. “Let me assure you that Pakistan will not default,” said the finance minister.

He also said the re-financing of commercial loans by China would be secured. He said the country required $32 billion in the current fiscal year, while it had secured $35 billion in 2017-18 and added that there was one difference that earlier the country’s macroeconomic indicators were much better.

He said there was nothing to worry about and they would manage the economy without facing the risk of default.

Sharing the macroeconomic figures of both regimes since 2013, he asked journalists to analyse the data and decide who was right and who was wrong. He termed devaluation the mother of all economic ills, as it hiked inflation.

He said that PTI claimed that the fiscal deficit was 7.6% of GDP in FY2018 but actually it was 5.8%. He said the PTI claimed that the fiscal deficit was reduced to 5.5% of GDP by increasing taxes from Rs3.7 trillion to Rs5.5 trillion in a single year. In FY2019, the fiscal deficit actually increased to 7.9% of GDP, while the FBR tax revenues reduced by 0.4% to Rs3,828.5 billion against Rs3,843.8 bn in FY2018.

“The PTI claims that in 2018, the economic growth plummeted to 1.5% and inflation rose to 10.5%. This statement is misleading. In FY2018, the economic growth was at 6.10%, while during the first year of the PTI government i.e FY2019, growth declined to 3.12%. Inflation was 4.7% in FY 2018 (old base 3.9%), while it rose to 6.8% (old base 7.3%) in FY 2019,” he continued.

Dar said the PTI claimed that in 2018 the discount rate increased by 325 basis points; however, when the PTI government assumed charge in August 2018, the policy rate was 7.5%. It increased to 13.25% by July 2019 by 575 bps, so the statement “increase in the discount rate by 325 bps” is incorrect and not true.

The PTI claims that 5.5 million new jobs were created during FY2019-22 but the actual data shows that only 3.2 million new jobs were created during the same time period.

He said exports remained virtually the same in PMLN tenure due to massive compression in the global commodity prices.

“The GDP growth during the PMLN tenure ranged from 4.05 to 6.10% while growth ranged from -0.94 to 5.97 % in the PTI tenure. The GDP in-terms of dollar increased by $112 billion in the PMLN tenure, while in the PTI tenure, it increased by only $61 billion in 42-month rule.

The per capita income during the PMLN tenure recorded 27.3 percent growth ($1,389-$1,768) while in 42-month tenure of PTI the per capita income reached $1,798 only.

Dar said the PTI’s claims of lost jobs of 1.5 million in the textile industry and many more in other industries & professions was based on perception having no supporting evidence. The minister said the PTI attempted to mislead the masses by claiming an increase of 22.5% in unemployment. “This is not based on facts, as no labour force survey has been released by the PBS for FY22 and beyond.”

Dar said during the PMLN tenure, maximum CPI was 8.6% and minimum stood at 2.9%, while in the PTI tenure, maximum CPI reached 12.2% and minimum stood at 6.8%.

During the PMLN tenure, maximum food inflation was 9.0% and minimum stood at 2.1%, while during the PTI tenure, maximum food inflation reached 13.6% and minimum stood at 4.6%.

Regarding the twin deficits, the minister said that the fiscal deficit averaged 5.2 percent of GDP during the PMLN government against 7.2 percent of GDP on average during the PTI tenure.

He said the trade deficit deteriorated during the PTI tenure by 31% and reached $29 billion. Trade deficit improved by 26% from $17.4 bn to $12.8 bn during the first five months of the current FY. The Current Account Deficit improved by 57% from $7.2 bn to only $3.1 bn during the first five months of the current FY 23.

The policy rate reduced to a historic low at 5.7 % in FY2016 from 10% at the end of FY2014 due to improved macroeconomic indicators. In August 2018, the SBP adopted a policy rate reversal.

In FY2022 due to macroeconomic imbalances including higher imports, mounting current account deficit and soaring inflation, the policy rate increased to 13.7%.

In PTI’s tenure, policy rate increased by 7.25% (6.5% to 13.75%), whereas in PMLN current year it has increased by 2.25% only (13.75% to 16%).

For social safety nets, the minister said that for FY2023, the budgetary allocation of BISP was increased to Rs364 billion and the government had planned to expand the scope of BISP and increase the number of beneficiaries up to 10 million.

The minister said the government had also included 500,000 more people from Balochistan in BISP, which would cover around 65pc of the population of the province. For this purpose, more BISP centres are being established in the province.

In addition to the above, the government provided flood relief/cash assistance of Rs70 billion to 2.7 million beneficiaries through the BISP.

Dar said the total public debt and liabilities stood at Rs29.8 trillion in June 2018, while under the PTI government, it went up to Rs53.549 trillion, the highest-ever increase in total public debt and liabilities. He said the government was passing through a difficult phase on the forex reserves position due to PTI government policies as mismanagement of 42 months could not be blamed to the PDM tenure.

He said the PDM government had to increase the fuel prices to honor the commitments made by the PTI to IMF. He said temporary problems in L/Cs had been partially managed by now and would be restored to normal in the near future.