Finance Minister Asad Umar on Wednesday addressed a live question and answer session on the state of the country's economy. The session, broadcast live from social media accounts operated by the ruling Pakistan Tehreek-i-Insaf (PTI), saw the finance minister answer queries from an assortment of journalists from new and old media. Umar identified several reasons why the 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," he said. "To resolve this you either need to increase exports or decrease imports. Our immediate action was to cut imports, which slows down the economy." 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, Umar acknowledged the criticism.
"They say that if the economy does not grow at a seven per cent 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," he explained. "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 said.
"Some investments create more jobs, some less," he added, arguing that the government's priority areas would create disproportionately more jobs. "There will be growth from year three onward, but it will be sustainable and long term," he promised. "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. Then there will be growth."
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 were improving. "Now that we are out of the fight for survival zone, the purse strings will be loosened." The minister was also questioned on the federal government recently raising prices for petroleum products by up to 6.45 per cent. When the minister was reminded that he had suggested that petrol prices should be set at Rs46 a litre during the PML-N government, he contested the claim.
"I had never said that petrol should be Rs46. I had said that the tax [on petrol] should be lower than it was," he said. "The tax ratio at the time was 52pc [of the total price of petrol], right now it is 30pc. Had we kept the same taxes as before, we could have silently gathered Rs97bn more from the Pakistani public. We have actually lowered tax ratios," he insisted.
"Ogra [the Oil and Gas Regulatory Authority] does the petrol price calculation. On April 1, when the new prices were recommended [which included a Rs11 hike in the petrol price], the only thing the government did was reduce the recommended increase by Rs5," he added. A day earlier, Umar had announced that the government is planning to introduce another amnesty scheme to provide non-filers of tax returns an opportunity to whiten their undeclared assets at home and abroad.
When asked why he had taken an opposing stance to his stated position on 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. The finance minister also defended the government's decision to not rush into an International Monetary Fund (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."
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