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  • Pakistan beats growth target, posts 6% in FY22: Miftah Ismail

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    Finance Minister Miftah Ismail, Ahsan iqbal and Khuram Dastgir File photo Finance Minister Miftah Ismail, Ahsan iqbal and Khuram Dastgir

    A day before announcing the budget for the fiscal year 2022-23, the coalition government reflected upon the performance of the economy for the outgoing fiscal year with a growth of 6% against the envisaged target of 4.8%.

    Finance Minister Miftah Ismail, who succeeded Shaukat Tarin as the country’s finance czar in mid-April (which interestingly is when the survey review period ends), chaired the launch ceremony of the Economic Survey 2021-22.

    "The situation in Pakistan has remained the same whenever the country records growth but, unfortunately, it falls into the crisis of current deficit,” Miftah said in a televised press conference.

    He said that historically, Pakistan’s economy had shown periodic boom-bust growth cycles. And the reasons for such volatile growth cycles included the wide-ranging economic challenges like shrinking fiscal space, exchange rate pressure, mounting current account deficit, and inflation, among others.

    “The same has happened this time as well, the recent 5.97% growth recorded during the outgoing fiscal year 2021-22, according to the new estimates, has pushed Pakistan towards the balance of payments and current account deficit crisis,” the finance minister lamented.

    He further highlighted imports have also increased by 48% as compared to the last fiscal year, while the exports have also moved up, adding that the trade deficit stood at $45 billion.

    "I assure you that till Tuesday next week, the issue of foreign exchange reserves will be resolved as the expected $2.4 billion will be transferred from China,” he said.

    The finance minister added that former prime minister Imran Khan left "landmines" — referring to subsidies — for the incoming government and it was tantamount to "giving people cheques that would bounce".

    "He knew that his government was going to be ousted, therefore, he left landmines for the next person to come in power — and that currently is Shehbaz Sharif [...] but now was the time to rectify Pakistan's economy."

    Miftah said the coalition government had saved Pakistan from defaulting, and from now, the country will witness "sustainable growth with responsibility".

    The finance minister said the growth would be sustainable as the country would not repeatedly see a balance of payment crisis and current account deficit.

    He said that in the previous years, the exports were around half of the imports. However, the export-to-import ratio stood at 40:60 now, adding that Pakistan could only finance 40% of its imports through exports, and for the rest, it had to rely on remittances or loans — which makes the country remain stuck in a balance of payments.

    "We also need inclusive growth. We have always facilitated the elite so they could boost the industry and benefit the economy. This is one strategy, but when we provide privileges to the elite, then our import basket gets heavier," he said.

    A rich person spends a lot on imported items as compared to a low-income person, he said, adding that the government should financially empower the low-income segments of society to boost local production.

    "If we do this, then maybe our domestic and agriculture production would increase, but it will not move up our import bill. This growth will be inclusive as well as sustainable," he said.

    The finance minister added that since energy prices are too high in Pakistan, the local industry was "uncompetitive."

    He said the supply of gas supply to all industries has resumed after being shut for some time, noting that the supply to industries would not have been stopped had the PTI government entered long-term agreements.

    The previous government did not make long-term plans, forcing Pakistan to buy energy and oil at costlier rates, which is leading to worsening the economy of the country.

    "And this is not PML-N, JUI-F, PPP, or the coalition government's economy whose economic situation is worsening; it is the state of Pakistan that is seeing an economic turmoil," he said.

    The finance minister, talking about the foreign direct investment (FDI), said it was around $2 billion in 2017-2018, but it stood at around $1.25 billion in the first nine months of the outgoing fiscal year.

    Miftah said the trade and current account deficits have increased as compared to 2017-18 — the fiscal year when PML-N's government ended — as an "incompetent" ruler was imposed on Pakistan.

    Miftah said although coronavirus was once in a lifetime pandemic, the government missed historic opportunities. "After COVID, oil and gas were at record-low rates, which the PTI government missed."

    He noted that although several lives were lost due to the pandemic, the country did not face much of a loss on the economic front as the G20 deferred the loan repayment of more than $4 billion and International Monetary (IMF) gave an additional $1.4 billion to Pakistan.

    "The previous government did not consolidate it and could capitalise on it," the finance minister said, slamming the PTI for reducing the agricultural yield as Pakistan now has to import wheat from countries, that it would export in the pre-PTI era.

    Miftah stressed that since Pakistan is a nuclear country, its export-to-GDP rate should be 15%. "The problem in Pakistan is not that our import is a lot, but the issue lies in our exports being less," he said.

    The finance minister said the PTI government took historic loans during its tenure. Miftah added the government would be needing $3,100 billion for debt servicing this year and the $3,900 plus billion next year.