IMF wants to observe 3 more quarters, examine flood rehab plan: Dar

ISLAMABAD: Finance Minister Ishaq Dar has said that the International Monetary Fund (IMF) wanted to see not only the previous quarter but also the next three quarters, besides how the country would meet the $16 billion reconstruction and rehabilitation phase of floods.

He stated this during a discussion at the “Second Pakistan Prosperity Forum – Sustained Economic Growth”, organised by the PRIME Institute in partnership with Business Recorder, Friedrich Naumann Foundation, and Atlas Network on Wednesday.

While replying to the questions of the participants, Dar said that the “first quarter’s review in totality and performance criteria is in order and had the Fund come in October 2022 and reviewed, the 9th review would have been over. I don’t want to indulge in global politics but I did request them to come at the end of October, or early November but they chose not to,” he added.

The finance minister said: “IMF wants to see not only the previous quarter but also the next three quarters of the current fiscal year,” adding he is ready to provide them with whatever is reality as of now. He said that now Fund also wants that Pakistan should demonstrate how it would meet the $16 billion demand for reconstruction and rehabilitation phase of floods.

IMF programme: Govt remains committed, Dar tells Nong

The minister said that reconstruction and rehabilitation would take five to seven years and in his opinion, the lender was “a little bit unrealistic and unreasonable”.

He said that he does not blame the Fund rather “we are to be blamed for creating credibility gap as a country because the previous government chose not to implement the agreed roadmap but also reversed what was already implemented”.

Dar said that Pakistan has not been able to raise its revenue and control its expenditure and consequently is having a huge fiscal deficit and that is being added to the country’s loans, pulse depreciation. Replying to yet another question, he said that under the 7th NFC Award, resources from federal to provinces had shifted very fast and the balance of resources was tilted towards provinces with 60 percent and 40 percent to the federation and responsibilities were devolved.

He further stated that there is a need to find a solution to the problem and he had something in mind in this regard but would not share. He said that some contributions about the security and debt are to be made by the provinces; otherwise, the debt would continue to balloon, consequent to the high fiscal deficit.

The minister said that the government has to privatise whatever it can privatise to stop incurring extra burden on the budget. When asked about the reduction in expenditure consequent to floods, he said that there is space for reduction in debt servicing if inflation and policy rate comes down but security expenses cannot be reduced.

Earlier, during the discussion, he said that the previous government has increased the public debt to Rs44,500 billion from Rs25,000 billion and the total debt and liabilities to Rs54,500 billion. He said that debt servicing has increased from Rs1,750 billion to Rs4,500 billion.

Dar added that this was an unbearable increase in the public debt and this has happened because the fiscal deficit was very high and the rupee was left to a free fall. The exports did not increase as were expected by economic pundits who said that the depreciation of the rupee would result in a significant increase in exports, the minister added. Instead, as a consequence of the depreciation, the debt increased.

The finance minister maintained that if the previous government would have pursued the formula followed by their government in 2017-18 for providing an export package of Rs180 billion after calculating the input component of every product, it would have saved itself from higher inflation and 14 percent policy rate.

He said, of course, debt is very important and added that the US debt-to-GDP is 110 percent, the UK after post-Covid 101 percent, and Japan 257 percent but their politicians and media houses are not talking about their countries in a ‘debt trap’.

He said that the previous government has stated at every forum that the country was in the debt trap. The finance minister said that politics must be detached from the economy and the country.

About market-based exchange rate, he said that the credit of market-based exchange rate goes to the Pakistan Muslim League-Nawaz government for starting real effective exchange rate in 1999. However, he said now the problem is that in any system there are speculators, gamblers and “hundi hawala” who take the country’s currency as a hostage and if the state does not play, then this would happen what has happened now.

He also referred to the Bank of England’s recent intervention, as well as, Bangladesh and India in a similar situation. The finance minister said: “we have to ensure that these abuses are checked and multilaterals have to understand this.” When asked whether he was suggesting revisiting the State Bank of Pakistan (SBP) autonomy, he said he thinks it (the autonomy) has gone too far and added that what is the point that the country’s Central Bank should have the growth as last priority. “We will cross the bridge when we reach there,” he said.

Copyright Business Recorder, 2022