File photo of Finance Minister Miftah Ismail
Finance Minister Miftah Ismail has said he wants Pakistan to learn to live within its own means, stressing import payments should not exceed dollar inflows to ensure macroeconomic stability.
In an interview with Bloomberg News, he admitted this was a tall order for the one year remaining in the incumbent government’s tenure, but “we can start.” He said this process could be facilitated by imposing hefty duties on imported products such as home appliances and cosmetics, adding remittances provided by citizens living abroad would also help make-up any gap between inflows and outflows.
Last month, Ismail had announced that Pakistan was withdrawing a blanket ban on all imports—imposed to conserve foreign exchange reserves—but was restricting the import of automobiles and automotive parts. According to Bloomberg, this step was initially slated to span three months, but might need to be extended due to the perilous economic situation arising from this year’s devastating floods.
According to government estimates, the floods could leave a financial impact of at least $10 billion due to the scale of the destruction, which has destroyed homes, standing crops and livestock in addition to the loss of life. Among the key takeaways is the destruction of much of Pakistan’s cotton crop, which is essential for the country’s textile sector and its role in export revenue.
Ismail told Bloomberg, the government would allow the textile industry to import as much cotton as it needed to remain operational. He also recalled that Islamabad had already allowed the import of tomatoes and onions from Afghanistan, Iran and Turkey to overcome shortages caused floods and reduce inflationary pressures on the general public.
“If I have limited dollars, I will absolutely make sure that I use them to buy wheat, I use them to buy edible things for our people,” he said. “Maybe we can delay buying Audis and Mercedes,” he added.
Economic growth
Last month, the International Monetary Fund (IMF) approved the revival of a stalled $6 billion Extended Fund Facility for Pakistan, releasing a $1.16 billion tranche while expanding it to $6.5 billion. This has been seen as key to avoid default and facilitate further loans and grants from other multilateral and bilateral sources. Already, per Ismail, Islamabad has secured pledges for $9 billion in investments and loans from Qatar, Saudi Arabia, and the U.A.E., adding he expects a $1 billion investment in listed state-owned companies to materialize within a month.
He said he expected the country’s economic growth to hit 3.5 percent or more for the ongoing fiscal year, a drop from the initial target of 5 percent. This is a result of both the floods and some slowdown in industry due to the imports ban. The minister also predicted that inflation, currently at record levels, was nearing its peak and hoped it would average out to 15 percent for the year.