Former finance minister Shaukat Tarin said on Thursday said the incumbent government is steering the country towards default and “if the current challenges are not resolved, then default will be imminent for Pakistan”.
Commenting on the Pakistan Democratic Movement (PDM) government’s 90-day performance, Tarin said political instability amid the commodity ‘supercycle’ in the international market could derail the economy. “Inflation has yet to peak and it can spike to 50% as well,” he said, highlighting that wholesale inflation was recorded at 40%, highest since 1974.
He lamented that the government was abandoning welfare projects initiated by the Pakistan Tehreek-e-Insaf (PTI) government such as Kamyab Pakistan, Kamyab Jawan and the Mera Pakistan Mera Ghar.
The former minister also pointed out that the government failed to order fuel shipments on time and resorted to energy load-shedding to hide its mistake. He stressed that urban areas were facing 4 to 8 hours of load-shedding while power cuts in rural areas were 8 to 12 hours long. A lot of coal, RLNG and furnace oil-based power plants are facing shutdowns because fuel was not timely procured, he said. According to him, the country would continue to face load-shedding in the foreseeable future.
“The government has chosen to inflict load-shedding on the people in a bid to save foreign exchange by withholding payments of independent power producers,” he added. He said spike in petrol and diesel prices would affect the cost of public transport, agriculture tube wells, tractors, food and other essentials. “Price of all daily items has gone up by 30-50%,” he said.
Meanwhile, borrowing costs of consumer loans have increased sharply as well and it is expected to rise further, he said. Tarin highlighted that rupee devaluation and soaring KIBOR rates had hiked the cost of doing business. Textiles, automobiles and mobile phone manufacturing plants have shut down and millions of people were laid off as a result, he said.
He cited that fulfilment of tax target of Rs6.1 trillion by the Federal Board of Revenue in fiscal year 2021-22 was an accomplishment of the PTI government. He further said that the PTI government imposed no super tax, and did not increase tax rates. “Imran Khan slashed the Petroleum Levy to zero,” he said.
Tarin said the present government was giving relief to tax evaders by introducing Fixed Tax Regime for traders. “GST exemptions have been reintroduced while withdrawal of CNIC condition has hit the economy’s documentation drive and will encourage black economy,” he said. He said that there was a dire need to broaden the tax base. “We left a database of 43 million potential taxpayers. However, they take the easy way out by taxing the existing taxpayers,” he added. He said that track and trace system implementation has visibly gone into a slowdown.
While talking about buying Russian fuel, Tarin said that Russia is not Iran and has not been facing any sanctions.
He said that countries in Europe, India, Bangladesh and Sri Lanka were buying Russian oil. However, the people at the helm of affairs in Pakistan at the moment have been fearing repercussions from America. He said that there are many plants in the country that could process Russian oil including that of Byco and Attock. Moreover, one can buy Russian oil and swap it in the international market to hedge against rising prices.
Muzammil Aslam, PTI’s spokesperson on economic affairs, said Moody’s rating for Pakistan remained at B3 since 2015. However, in its latest review, it reaffirmed the B3 rating but changed the outlook from stable to negative. Negative outlook is driven by heightened external vulnerability risk and uncertainty around the ability to secure additional external financing to meet its needs.
Pakistan’s external vulnerability risk has been amplified by rising inflation, which puts downward pressure on the current account, the currency and already-thin foreign exchange reserves, especially in the context of heightened political and social risk. “As per news reports, the International Monetary Fund (IMF) has also set four tough prior conditions, some of which were there previously and some which are new. “We believe that this is likely due to the lack of trust that has been developed recently, especially due to relaxation in NAB laws and poor budget 2023,” Aslam said, referring to Pakistan’s efforts towards reviving its stalled IMF programme. Aslam said that the budget has also not been reconciled.
