Hafeez lays bare grim facts about economy

The Advisor to the Prime Minister on Finance Dr Abdul Hafeez Sheikh on Wednesday criticised the opposition lawmakers in National Assembly for their 'unfair criticism' on the government's 'tough' economic policies. Speaking on a motion on the economic conditions in the country, Sheikh said that the PTI government had worked harder towards overcoming economic challenges than several previous administrations.

Announcing that he would be making a non-political factual statement, Sheikh described political instability in the country as one of the major reasons behind lack of economic destabilisation, which is evident from the fact that no prime minister has completed a five-year term.

He said the present government inherited the highest current account deficit of $ 20 billion, external loans of US$ 95 billion, a higher fiscal deficit while the government was required to repay Rs 5,000 billion in the next two years.

He said the government also inherited nosedived foreign exchange reserves. Sheikh added that the only source of earning foreign exchange reserves, exports, were declining. He said there was zero export growth during the last five years.

"The crisis in Pakistan is due to the fact that our country doesn't have dollars...we're going on depleting dollars and increasing our liabilities in dollars. And what is happening to exports? Because there is only one way to earn dollars that is exports," he added. Sheikh said that over the past five years the rate of growth in exports was zero. "A system in which the dollar was purposely kept cheap was in place," he said, adding that imports were growing in the country, which adversely affected industrialisation and exporters alike.

He said that other concerns were the slow rate of development in agriculture as well as infirmities in the electricity sector. "We, as a country have been unsuccessful in solving this problem of energy sector," he said and added that the energy sector challenge gave birth to a swelling circular debt.

Sheikh said that when present government came to power, it could see the country entering into a crisis and no one was ready to give Pakistan loan, adding that "when people raise questions that you didn't do this or that, the fundamental reason for that was that dollars [foreign exchange reserves] had been depleted [enormously] and nobody was ready to give us a loan."

Sheikh said that under all conditions they had to save the country from default. He said various friends of Pakistan provided $8.5 billion loan and oil facility on deferred payment. Another important step was taken by the government was to approach the IMF.

He added that the present government has taken some decisions which are "historic", adding that one big decision that was taken was to freeze the budget of the Pakistan Army. He asked: "Has anyone else taken such a decision ever?"

He said that besides military budget, the civilian government's budget was also reduced by Rs 40 billion, adding that these were "big decisions", which he never witnessed while worked with other administrations.

Sheikh said that there was a growth of 16.5 percent in taxes during the first seven months of the current fiscal year and against target of Rs 2,200 billion, the Federal Board of Revenue's collection was Rs 2,100 billion. Additionally, he said that borrowing from the SBP over the past seven months was zero, as they had decided not to borrow from the SBP because such borrowing tends to be inflationary. He said that foreign direct investment has doubled while portfolio investment fetched $ 3 billion in the first three months of the current fiscal year.

He said the government's priority while preparing budget was two groups - the weakest segments of society and those who are supporting the government in increasing exports. He said the government increased allocation for social safely net to Rs 192 billion from Rs 100 billion in the budget.

He said the impact of the measures taken to benefit exporters was that exports started increasing when the other countries of the region were struggling to enhance their exports.

According to Sheikh, one of the grave dangers was the current account deficit, which he said had been reduced from US$20 billion to US$13 billion in the first year. He added that there was a primary surplus for the first time in ten years. "I am not saying anything political, I am simply stating the facts," he maintained.

With regard to fiscal deficit, Sheikh said that it had also seen a downward trend and gap in revenue collection would be plugged through non-tax revenue. He said that non-tax revenue has increased by 170 percent and is expected to be around Rs 1500 billion. Sheikh said the exchange rate also appeared to be at a stable level.

He said that circular debt was increasing Rs 38 billion on a monthly basis, which has been reduced to Rs 12 billion and those using less than 300 units 972 percent of power consumers) are being provided subsidy.

"In 72 years, we have failed to convince the world to invest in Pakistan. We've failed to establish a tax collection system in 72 years...these are the reasons, we still depend on other countries to boost our finances. We all need to contemplate why the growth rate remained unstable," he maintained.

He said the economy is directly affecting the masses even though the government is working on maintaining financial stability, adding that "invoking the past was discouraged but the debt situation inherited by the incumbent government had to be acknowledged as it was due to the past governments because of which we had to repay Rs 5,000 billion in loans in FY2019-20."

Referring to Pakistan People's Party (PPP) and Pakistan Muslim League-Nawaz (PML-N), he said that those who ruled the country in 2008 and 2013 also must not forget that they also knocked the doors of International Monetary Fund (IMF) for loans.

"This is a national issue and our development isn't at the pace that we don't go to the IMF. No government goes to the IMF by choice as it is the situation which compels it to go for borrowing," he added.

He said that describing him and State Bank of Pakistan (SBP) governor, Reza Baqir as the "representatives" of IMF is quite disappointing as one should be happy if someone has made it to such a great institution through sheer hard work.

"We should be proud of Reza Baqir. He went on to study in the best American school after having completed his studies in Lahore. He went on to join the IMF solely on the basis of his capabilities...people who did not have the credentials to even enter the halls of IMF were criticising the SBP governor for having worked there," he said.

Giving some of the advantages of an IMF programme, Sheikh said the first was that the financing of $6 billion provided was based on 'easier' conditions, adding that if this money was obtained commercially it would have been more expensive.

The second point, he said, was that the whole world was reassured that Pakistan was ready to operate with "discipline" and ready for partnerships with other parts of the world.

"The direct advantage of this is that other countries and international organisations including the World Bank and Asian Development Bank (ADB) also increased their support for Pakistan", he added.

Later in the afternoon, PPP MNAs created disorder in the House over Energy Minister Omar Ayub's remarks through which he stated that corruption is "in the genetic makeup of the PPP and the PML-N". In an obvious reference to PPP co-chairman Asif Zardari, he said that "a man known as Mr Ten Percent is known world over as a British newspaper once headlined: Cameron should count his fingers after shaking hands with Pakistan's Mr Ten Percent' - in the wake of a meeting between the PPP leader and the then British Minister."

The PPP took exception to the comments and urged National Assembly Deputy Speaker Qasim Khan Suri to ask the minister to refrain from making such comments.

However, when Ayub continued his tirade against the opposition, PPP lawmakers led by Agha Rafiullah surrounded the energy minister, prompting treasury members to step with a view to easing the situation. While Ayub and Rafiullah remain engaged in a verbal clash, treasury members, including Minister for Economic Affairs Hammad Azhar and Minister for Science and Technology Fawad Chaudhry, stepped in to pacify the PPP lawmakers.

Earlier, Responding to Sheikh's comments, incarcerated PML-N leader Shahid Khaqan Abbasi underscored that the Hafeez Shaikh avoided addressing main issues such as wheat and sugar crises. He demanded formation of a parliamentary committee to investigate the wheat and sugar crises.

Criticising the current economic situation, Abbasi warned that the country's debt would swell multifold by the time the ruling party completes its term, adding the entire government comprised experts who are best at fields other than their own.

"Human rights minister wants to do the work of the foreign ministry while the foreign ministry is interested in running economic affairs," he quipped. Taking a dig at Sheikh and the ruling party, he said even those who have been part of past governments are unable to run the country.

"The Ministry of Climate Change banned plastic bags," he acknowledged. "But we are still waiting for Fawad Chaudhry to take us to the moon." "George Orwell's The Animal Farm represents the reality of the country at the moment," he told parliamentarians that it's a good book to read.

"I'm ready to donate 200 copies to distribute in Parliament," he concluded.

During the question-hour, Minister of State for Parliamentary Affairs Ali Muhammad Khan said that Prime Minister's Emergency Programme is being launched to enhance cotton production in the country.

"New seed varieties will be provided to farmers to enhance the productivity of cotton crop...incentives will also be given to farmers to woo them for cotton cultivation," he added.

Parliamentary Secretary for Commerce and Textile Aliya Hamza told the house that Pakistan Steel Mills will be revived through public private partnership. She said thirteen companies have evinced interest in Pakistan Steel Mills. She said Pakistan Steel Mills is a very important institution and it will be run at all costs.

She said that the present government has announced two relief packages for the common man worth ten billion rupees and seven billions rupees through the Utility Stores Corporation. She said a reduction in the prices of essential commodities at the utility outlets has helped bolster their sales.

Parliamentary Secretary for National Health Services Nausheen Hamid said strengthening primary healthcare is top priority of the government. She said reforms are also being introduced in important departments such as Drug Regulatory Authority.

Parliamentary Secretary for Water Resources Saleh Muhammad said government is working on construction of dams to meet the water shortage. He said work on Mohmand Dam is in full progress. The project will be completed before the stipulated time. He said about 11.50 billion rupees has been collected under the dams' fund.