File photo of Finance Minister Ishaq Dar. Photo courtesy PID
Finance Minister Ishaq Dar on Wednesday reiterated assurances that there is no risk of Pakistan defaulting, stressing that despite persistent challenges, the country has a bright future and a “resilient” economy.
Addressing a ceremony to mark the first listing of the Real Estate Investment Trust (REIT) on the Pakistan Stock Exchange (PSX), he slammed analysts and political rivals that keep warning of Pakistan being on the brink of default. “We hear every day that Pakistan will default. How will it default? There is no chance,” he said, while acknowledging the country was in a “tight” fiscal position as the coalition government had not inherited significant reserves from the ousted PTI-led regime.
“The fault is in the system and we must ensure that everyone works together for Pakistan’s progress,” he maintained. “Pakistan can progress and it will. Pakistan has a beautiful future irrespective of whether I am here or not,” he stressed, recalling that the same voices warning of default now had earlier been speculating that the country would not deliver on its $1 billion bond payments. Even though these payments were made earlier this month, he lamented, “these pseudo-intellectuals keep coming.”
Urging investors to ignore the criticism, he said it was vital to raise awareness about Pakistan not defaulting. “I can go against anybody in any discussion and I can prove Pakistan will not default. But we are damaging the country for petty politics and petty objectives,” he said, noting that the country’s debt-to-GDP ratio was 74 percent compared to America’s 110 and the U.K.’s 101. Despite this, he said, “nobody there says we are in difficulty and a debt trap.”
Regretting that “we are our own worst enemies,” he said malicious propaganda must be countered so people would not resort to “panic-buying” of gold and U.S. dollars. “We have serious issues but this does not mean we cannot get out of the storm we are in,” he emphasized, as he also addressed the difference in the rupee’s exchange rate against the dollar in the interbank and open markets. “We were moving in the right direction and there was Rs. 1.5 difference between the interbank and open market rates,” he said of the situation when he assumed the charge of finance minister from predecessor Miftah Ismail.
Dar blamed the deteriorating situation on the smuggling of the dollar to a neighboring country—Afghanistan—as well as the import of partially subsidized wheat and “heavily subsidized” fertilizers, which he alleged were also being smuggled. He said law enforcement agencies had been directed to tackle the smuggling operations, stressing that the economy must be defended like the country’s borders. “Law enforcement and intelligence agencies are doing their best,” he added.
IMF loan
On the government’s Extended Fund Facility with the International Monetary Fund (IMF)—which is once again stalled—the minister vowed that it would be completed despite the “difficult” conditions that had been agreed by the previous government. “They [agreements by PTI-led government] are sovereign commitments and should be delivered and we are delivering them,” he said, adding that the PMLN had completed an IMF program once before in 2016 and would so a second time.
“But Pakistan’s people should not be taken hostage,” he said. “We will do political management so that the burden on the public is reduced. Since I took over, my stance has been that if we can’t give relief, we should not increase the burden as well. We have delivered on our commitment on PDL [petroleum development levy] but we have reduced [fuel] prices thrice,” he added.
According to Dar, the government has enacted policies to decrease inflation, and has also reduced the trade deficit and improved the current account balance. “There is no magic wand to immediately improve things. Our [mechanism] is in place. We will not default. Everything is under control,” he reiterated.
Recalling the last PMLN government, he said Pakistan had been declared “macro-economically unstable” in 2013 and there was widespread belief that the country would default within 6-7 months of elections. However, he said, the government had within just three years brought the Consumer Price Index to 4 percent, food inflation to 2 percent, the policy rate to 5 percent and growth to over 6 percent. “We should reflect on why Pakistan has reached this point. Pakistan was predicted to be the 18th-biggest economy by 2030. Why have we reached this stage today where we are running after even $1 billion? I believe introspection is needed. We should not repeat the misadventures and experiments because of which we are standing here today,” he stressed.
Claiming the government had “identified” several sources of external resources and inflows, he claimed the situation would “significantly” improve by the end of the fiscal year.
The finance minister also announced that he had convinced the State Bank of Pakistan to lift curbs on the import of essential items.