— Asad Umar claims a ‘very clear strategy’ regarding economy has been set
— Argues ‘we don’t need IMF’s dictates’ for reforms
Here is the link of the Interview:
Stephen Sackur, the host of HARD-Talk, a BBC television and radio programme consisting of in-depth 25-minute one-on-one interviews today invited Finance Minister Asad Umar where the minister answered questions about the country’s economic crisis, China Pakistan Economic Corridor (CPEC), and loans taken from China and Saudi Arabia.
Asad Umar, who became the finance minister after the Pakistan Tehreek-e-Insaf government came into power this year after a two-decade-long political struggle was presented with serious questions over the government’s ability to ‘end the begging bowl syndrome’.
Stephen Sackur asked whether the PTI government was strong enough to put Pakistan on a different course, and why the country had reached out for economic assistance from Saudi Arabia – a country that is notorious for social suppression, and China – the military and economic rival of Western powers.
He also pointed out Prime Minister Imran Khan’s statements during the country’s general election where he stated that he would be ‘ashamed to go abroad and ask for money’, and now, that is precisely what the PM has been doing.
Asad Umar stated, “By the time the government came into power, it was a very well known fact that the country needed an economic bailout. I pointed this out to the media, the print media, as well as the international media, and this is something that is not to be proud of. So if he [Imran Khan] has to do it, he is ashamed of it, but that is what we have had to do.
Pakistan is seeking its 13th bailout since the late 1980s to deal with a current account deficit that threatens to trigger a balance of payments crisis.
Speaking about the country’s economic situation, the finance minister added, “The real challenge, and the real issue here is, [something that we will be judged on in the future], did we take the right decision in setting the economy on a path to the last IMF programme that the country will ever have to take?”
On the current course of action, he further stated, “A very clear direction has been set. Pakistan now has a very clear strategy, [unlike before] which was consumption-led imported capital finance that has repeatedly put the country into these economic issues. Until we move Pakistan towards domestic resource mobilization, productivity-led, export-oriented economy, we will not be able to move out of this begging-bowl syndrome”.
Pakistan has already devalued the currency six times since December 2017, slashing its value by more than a quarter, and hiked its interest rate by 275 basis points since January, to 10 per cent.
Previously, PM Imran Khan had said the government was trying to bring down the current account deficit before approaching the International Monetary Fund (IMF) if it required. The IMF package always put a burden on the people and increased unemployment; however, the friendly states like China, Saudi Arabia and the UAE had given a good response to Pakistan to cope with the situation.
Pakistan, on November 19 received the first tranche of $1 billion from Saudi Arabia under the $6-billion financial package aimed at stabilising the fast-dwindling foreign currency reserves. Earlier, the reserves had contracted fast and dropped to a four-and-a-half-year low of $7.48 billion by November 9, 2018, according to the State Bank of Pakistan (SBP).
“It was agreed Saudi Arabia will place a deposit of $3 billion for a period of one year as a balance of payment support,” the foreign ministry had said in a statement. “It was also agreed that a one-year deferred payment facility for import of oil, up to $3 billion, would be provided by Saudi Arabia.”
Asad Umar in his conversation with the host of HARD Talk refuted claims that the PTI-led government was unable to tackle the country’s worsening economic condition since it had resorted to countries which did not impose the same ‘rigorous’ conditions as the IMF, and stated, “The sequence of actions [which is not as per what is being said] had been that when I became the finance minister, I invited the IMF in the first 10 days of becoming the finance minister, and had real conversations with them. We have not waited for the IMF to come to us, and tell us what we need to do for our own economy or impose any sanctions on us. We have done that without the IMF’s assistance.”
He further stated, defending the government’s decision to delay the IMF bailout programme and resorting to taking loans from China and Saudi Arabia, “In the very first 100 days, we have increased gas prices, we have increased electricity prices, we have put in a supplementary finance budget where we increased taxes. The policy rate has been increased by the central bank, the Rupee has been devalued.”
“Both the monetary policy and the fiscal policy have been moving in the very direction of the reforms that are needed. We don’t need IMF to dictate us for us to do that, because we believe this is what’s necessary. However, the path for reforms is different in the IMF as we stand today, and what we think is right for us. There is no difference of opinion about what needs to be done between us [the government and the IMF].”
After refuting claims about certain people in the country being unhappy about the CPEC project, Umar claimed that revenue generation has been at the core of financial reforms that the PTI government has developed.
Speaking about taxation, Sackur remarked that only 800,000 Pakistanis out of a population of more than 200 million pay any significant tax. He added while directing his question to Umar, “If you are going to change the amount of taxation received, it’s going to require the most massive reform.”
Umar, in his reply, stated, “Those are the very reforms that we have been working on despite the severe balance of payments crisis. The revenue generation aspect is absolutely central to be able to deal with the horrendous challenges that we are facing”.
Over the lack of revenue generation in the past, the finance minister remarked, “We need the revenue authority to be fixed. We have separated tax policy from tax administration, which is central to the reform effort.”
Referring to the Federal Board of Revenue (FBR), Umar continued, “Almost the entire administration of the tax authority has been changed. We have also made changes in law, which allow the application of modern technology, use of data analytics, algorithms, to figure out where tax-evasion is taking place, who is evading taxes. We have developed a list of high net-worth individuals who have been found evading taxes. 3001 of them have already been issued notices because we want to make an example out of them.”