Saudi Arabia and China were set to beef up Pakistan’s foreign exchange reserves much before the close of this month, Finance Minister Ishaq Dar said on Wednesday and announced that the government would be shortly imposing flood levy on the affluent and a significant gain tax on banks’ foreign exchange earnings to ramp up revenue.
“Our foreign exchange reserves by end-June would be much better than you can think,” Mr Dar said while speaking at a joint news conference with five other PML-N ministers.
He said the International Monetary Fund (IMF) programme would be completed at all costs, China and Saudi Arabi would enhance their support, government-to-government (G2G) disinvestments would be completed, and the current account deficit would be about $3 billion less than earlier projections.
The presser had been called in response to a “white paper” launched a day earlier by the opposition Pakistan Tehreek-i-Insaf (PTI), suggesting that Pakistan was on the verge of anarchy because of hyperinflation and unemployment.
Mr Dar repeatedly snubbed questions about the possibility of the country defaulting on its foreign debt, insisting that such speculation was being pushed by the PTI, whose white paper was “a pack of lies” and was allegedly based on selective data, misleading numbers, factually incorrect and devoid of economic context.
The minister disagreed that a threshold committed with the IMF under the eighth quarterly review for contingency budgetary measures had been crossed, as revenue collection during the first five months (July to November) of this fiscal year was above target.
However, he hastened to add that a heavy revenue ticket of Rs270-290bn super tax pitched for December could not yield results because of stay orders, resulting in a revenue shortfall in December.
“We are in any case planning to beef up revenues and considering a flood levy and a substantial recovery on account of unprecedented foreign exchange windfalls” earned by the banking sector, but there would be no measure that adds up to the burden on common people already suffering a lot of hardship, he said.
He noted that petroleum prices had not gone up for over three months and instead dropped by Rs19-20 per litre for petrol and diesel and by Rs29-30 for kerosene and light diesel.
Responding to a question, the finance minister said many countries had imposed taxes on foreign exchange earnings.
He said various agencies were already in action to combat the smuggling of foreign exchange and other commodities like wheat and fertiliser.
The minister recalled that during the prime minister’s visits in September, China and Saudi Arabia had agreed to increase their support to Pakistan, and the Saudi finance minister later confirmed this to international news agencies.
He said the process got delayed, but Saudi Arabia would increase its support much earlier than the end of this month, while the Chinese loan rollover was also being processed. He said the privatisation transactions, particularly the sale of LNG plants and others on a G2G basis, were also progressing and would be completed within six months.
Responding to a question, the minister said the IMF delay was because of the credibility gap caused by “reckless decisions” of the PTI government on the eve of the no-confidence vote.
Resultantly, the Fund raised questions not only about the quarter ending December instead of the original end-October performance but also sought details about the subsequent 11th and 12th reviews (until June), particularly on how Pakistan would finance $16.3bn flood-related requirements.
“We have provided these things” and would be meeting the IMF on the occasion of a donors’ conference in Geneva on Jan 9, Mr Dar said.
Inflation ‘major concern’
On inflation, he conceded that it was a major cause of concern for the government and it would now focus on gradually bringing it down. He insisted that inflation and other economic indicators would be much better by June 30, 2023.
Planning Minister Ahsan Iqbal said the major factor for higher prices of essential commodities was a total lack of support from Punjab, besides massive devaluation, PTI’s package for force energy price cuts and the global inflationary cycle.
Mr Dar said it was a dishonest presentation of the country’s economic situation by the PTI leaders, adding that they did not present what they inherited except the current account deficit, which too was being depicted out of context and even the PTI failed to show any improvement on that count by the end of its government.
He said the economic situation since April 2022 was strongly influenced by the legacy that the new government got from the previous administration.
He said the IMF managing director had recently noted that one-third of the globe would be facing a serious recessional problem in 2023, with Pakistan being no exception.
The finance minister said the PTI’s claim of about 100pc to 200pc increase in prices was incorrect because “authentic data” showed the prices of wheat rose by 33pc, cooking oil 21pc, masoor pulse 19.5pc, mash pulse 35pc, tomato 13.7pc, petrol 47pc, and vegetable ghee by 14.9pc.
Mr Dar also dismissed the PTI’s figure of creating 5.5m jobs during its government and said that official data finalised by the party itself put this number at 3.2m between 2019 and 2022.
He said the PML-N’s previous government had increased revenue collection from Rs1.938 trillion to Rs3.844tr in the last year, while the PTI administration reduced it to Rs3.829tr in its first year and reached Rs6.1tr in five years despite promising to double it from Rs3.9tr in 2018 to 8tr in its first year in office.
He said that during the first six months of the 2022-23 financial year, the revenue collection jumped 17.5pc to Rs3.429tr from a year ago and the annual target of Rs7.5tr would be met.