News Analysis |
Asad Umar, Pakistan’s Finance Minister, has asserted that the economic uncertainty facing the country and its business community will end by the mid of October. The Minister made these remarks during a television interview on Dunya News program” Tonight With Moeed Pirzada” hosted by prominent TV anchor Dr. Moeed Pirzada on 30th September 2018. The Minister also explained various aspects of the current economic challenge – left behind by the Nawaz government.
Finance Minister clarified that the presence of the IMF team in the country, in the last week of September, was neither routine nor related to a bail out package being negotiated. While several media outlets were abuzz with speculation that the IMF team was here for negotiating a new bail out package, Asad Umar asserted that the team had been invited by Asad himself to exchange ideas and to improve understanding on some issues. Finance minister stated that he was reviewing all options, he was not negotiating a bail out package from the IMF at this stage.
The government is bound to take some time to deliberate before showing all of its cards. Therefore the prediction of the ending of economic uncertainty by mid-October may not be far off.
IMF team in Islamabad not for negotiations
He had asked for an IMF staff mission so that there could be an exchange of data and other figures so that a different viewpoint could be obtained. However the presence of the IMF is being viewed with great significance by the local business community. In fact, many are linking the presence of the IMF team with the Annual IMF-World Bank meeting to be held in Bali, Indonesia on Oct 13 – as pointed out by Dr. Pirzada, the Anchor. However, the minister was quick to negate all links between the two.
Asad Umar said he had always told, even before taking oath, that he will take six weeks to complete his homework to examine all the options available on the table. After visiting the IMF 12-times in last 25-years, Pakistan is arguably contemplating another move, but that would ultimately be not in the best interest until all options are explored. “If I had uttered a few words that I am approaching IMF, it would have put an end to all uncertainty facing the economy. But, this was not the right approach.
The right criterion is to evaluate all the available options,” he asserted. Responding to questions that China and Saudi Arabia have not made any overt commitments so far, Asad Umar admitted that Pakistan at the moment has fewer options on the table; nevertheless, the government is trying to create options, amid dire economic conditions.
Saudi Arabia has not committed $10 billion for Oil City
Finance minister clarified that the assertions attributed to Information Minister, Fawad Ch, that Saudi Arabia has committed to making $10 billion investment in an Oil City near Gawadar is not accurate at this point. Saudis are very interested and warm towards Pakistan; investment can be $1 billion or $10 billon or more but nothing is clear at this moment. However, he further added that there were some details of high government meetings that could not be divulged, on the media, at this stage.
Exporters are key to the Economic Recovery
He emphasized that he stood with the business community and especially the exporters. “Exporters are not my cousins” but exporters are the key to the uplift of the economy, he asserted. He admitted that Nawaz and Dar government had withheld almost Rs. 200 billion of export rebates and still more than Rs. 100 billion of such rebates have to be paid to increase liquidity of exporters. He explained that government does not have enough funds to pay IPO’s and PSO is facing crunch but asserted that he will find ways to pay rebate back to exporters soon.
In fact, many are linking the presence of the IMF team with the Annual IMF-World Bank meeting to be held in Bali, this month. However, the minister was quick to negate all links between the two.
Fawad Chaudry had earlier stated, in a press briefing, that the Saudis had agreed to invest about $ 10 billion during the recent visit of the PM to the kingdom. While the Saudis are keen to invest, however, they have not committed a sum yet, Asad clarified. Fawad Chaudry has since then distanced himself from his previous statement. Appearing in a Dunya TV program, with Anchor Masood Raza, he struck a cautious tone when he said that he had discussed with the Finance Minister and its not wise to quote figures at this point.
Pakistan has spent $2 billion extended by China in July
Asad Umar, responding to Dr. Pirzada, TV Anchor, admitted that Pakistan has almost exhausted $2 billion extended by China as loans, in July, to support balance of payments. He confirmed that Forex reserves stood at around $9 billion and only sufficient to support one and half month of imports. But he explained that country’s foreign exchange is bleeding at the rate of almost $2 billion per month and that happened due to the massive expenditures Nawaz led PMLN government had been doing to create mega projects to woe voters, to buy out political classes and to win elections.
Commenting on the conflicting views of economists over the actual hole in the finances, Asad Umar contradicted that Pakistan still faces the $30 billion deficit. He said, the incumbent government has already taken the steps via amendments announced in the Finance Bill, and through the monetary actions of the State Bank of Pakistan to reduce the annual deficit of $24-25 billion.
Finance minister alleged that it was PML-N’s reckless policies to “buy” the July 25 elections which have played havoc with the economy. The PML-N doled out billions before elections in Punjab, he alleged. Punjab government’s deficit last year was Rs43 billion, while on the contrary, the Khyber Pakhtunkhwa government showed responsibility and kept the surplus of rs34 billion. In spite of this reckless spending, PML-N had to face the defeat but, PTI won with a majority in KP.
Fawad Chaudry too has distanced himself from his previous statement. The finance minister admitted that Pakistan’s economy faces the challenge of epic proportion.
Ahsan Iqbal had earlier asserted that PMLN was spending huge amounts on motorway and metros because it was “pro-poor”. Finance Minister rejected this argument that PML-N’s economic policies facilitated the poor in the society when it provided a huge subsidy in mass transport projects. Asad asked that what PML-N was up to when nearly half a million laborer in Faisalabad was unemployed. Exports deteriorated acutely, and imports flourished resulting in huge debt pile. If PML-N had the pro-poor growth policies, they would not have left the country in tatters. Government is hoping to turn around the fortunes to put an end to these cyclical bailouts every 4-year.
The FM defended the measures taken in the mini-budget and contradicted the allegation that the government increased the current account deficit and was in line with the predictions of independent economists. He clarified that the budget facilitated the poor. Furthermore, none of the previous governments adjusted Rs. 800 billion without the help of IMF. Pakistan faces a difficult financial situation, despite taking the staggering amount of loans in the last decade or so.
Ever-Shrinking foreign exchange reserves, the currency crises, and ever-increasing balance of payment gap have put the country on brink of financial collapse. All in all, Finance Minister Asad Umar defended his government’s economic policies and hit back at critics, who accused him of a lack of vision. However, he showed seriousness that he wanted to swing-around Pakistan’s economic fortunes.
It should be noted that the importance of timing is crucial in the decision-making in all-type of matters whether it is sports or politics. The government is bound to take some time to deliberate before showing all of its cards – its in power for less than 40 days. Therefore the prediction of the ending of economic uncertainty by mid-October may not be far off.