Finance Minister Asad Umar Wednesday admitted that the country’s economy is in a bad shape but assured that there will be light at the end of the tunnel.
“There are two reasons why were are in this mess: we have a budget deficit, and secondly, our external deficit. To resolve this, you either need to increase exports or decrease imports. Our immediate action was to cut imports, which slows down the economy,” he said during a special question-answer session broadcast live from social media accounts operated by the ruling Pakistan Tehreek-i-Insaf (PTI).
The minister claimed that Pakistan’s basic debts are so big that “we are near bankruptcy.” “You are going to the IMF with these massive debts in toe for a bailout. We have had to fill big gaps,” he said.
To a question about rising inflation, Asad Umar said, “If you look at the past, inflation affected all strata of the society equally. In fact, the poor had higher levels of inflation affecting them. In our tenure, however, this has seen a different trend with the poor feeling relatively less inflation as compared to the higher income groups.”
To a question, Asad Umar said, “You’re saying all my policies are like Ishaq Dar. While Ishaq Dar says I’ve destroyed the economy. During his (Dar) time, for the first time in Pakistan’s history, our exports didn’t grow.” “If you look at the numbers from PML-N’s time, there was double digit inflation then, which we have thankfully not hit as yet,” he added.
The minister likened the economy and the political fallout of the government’s ‘corrective’ economic policies to a patient being operated on. “It seems [to an outside observer] that he [the patient] has been cut open by a man with a knife in his hand, but the fact is that he [the patient] is being operated on by a surgeon [to alleviate his suffering].”
When asked how the government will come good on its promise to create two millions jobs a year as growth slows, the minister said, “They say if the economy does not grow at a 7% rate, two million jobs won’t be created. As a rule of thumb that [reasoning] is fine, but it [job creation] also depends on what our priorities are.” “Tourism, small and medium enterprises (SMEs), information technology (IT), and housing all are priorities, and all these sectors have the potential of job creation,” he explained. “Some investments create more jobs, some less,” he added, arguing that the government’s priority areas will create disproportionately more jobs.
Acknowledging that the government had to tighten its grip on the fiscal policy side due to the rapid depletion of foreign currency reserves at the start of its tenure, the finance minister said things are improving. “Now that we are out of the fight for survival zone, the purse strings will be loosened,” he hoped. “In September, I went to the PSX [Pakistan Stock Exchange] and I was asked the same question: when will growth be seen? I told them that we will go through a stabilisation period of two years after six months of extreme turbulence and then there will be growth,” he recalled.
When asked why he had taken an opposing stance to his stated position on tax amnesty schemes in the past, the finance minister conceded that the idea of amnesty schemes is a controversial one but said it is the need of the time due to the prevalent system. “Tax amnesty is controversial, of that there is no doubt,” he said. “You can say that it facilitates tax evaders, which will be a fair point. In my viewpoint, my previous objections are valid today as well.”
“But after consultations, the majority’s view is that it should be offered because in Pakistan the past system had been such that we want to give people a chance to come into the tax net. If the amnesty scheme does come, public officers and civil servants will not be eligible for it, even though some journalists have pointed out that they have the most money,” he said.
When asked why the Federal Board of Revenue (FBR) has not done enough to raise awareness regarding tax benefits and incentives that come with entering the tax net, Umar asked Minister for Revenue Hammad Azhar to answer the query.
“It’s right that FBR’s optics are lacking,” Azhar said. “There is a lot of work to be done and there is an awareness deficit. We did do a concerted advertisement campaign, following which a 34 per cent increase was witnessed in on-time filing. But we should do a sustained campaign. We actually want to delve deep down and correct FBR’s fundamental problems. Once those are done, there will be a visible change and then we will [run more awareness campaigns].”
The finance minister defended the government’s decision to not rush into an IMF programme at the start of its tenure. “Is the economy in this state for the first time in Pakistan?” he asked. “We have two world records: one in trolling and the other in entering IMF programmes. I talked to IMF officials and told them that ‘I don’t want to burden my nation with more loans’. They told me that the situation we have inherited has never been inherited by anyone else,” he claimed, explaining why the government had to go that route. “When you take a responsibility, you also have to take a position. They used to say that the IMF programme should be taken immediately so that markets do not run away. After six months, our reserves are in a better shape. I did not rush into an IMF programme just so I could avoid criticism [over the pain from the corrective measures taken to stabilise the economy]. Having said that, an agreement will be reached soon,” he added.
