Monday, Pakistan’s Finance Minister Ishaq Dar reassured investors that the country had a “beautiful future and a resilient economy” and that there was no possibility of default.
During a ceremony to celebrate the development Real Estate Investment Trust (REIT)’s first listing on the Pakistan Stock Exchange (PSX), he made the remarks.
Real estate investment trusts (REITs) are investment schemes that invest investors’ funds in real estate projects. They are required to list on the stock exchange within three years of starting their business. This requirement is designed to allow small investors to get exposure to a real estate market that is otherwise expensive and illiquid.
We are constantly informed that Pakistan will default. How will it go bankrupt? The finance minister stated, “There is no chance.”
“Yes, we are in a tight fiscal situation and do not have the $24 billion in reserves that the PML-N government left in 2016; however, that is not my fault. He stated, “We must ensure that everyone works together for Pakistan’s progress.” The problem is in the system.
“Pakistan can advance and it will. Regardless of whether or not I am here, Pakistan has a beautiful future.
Dar stated that there was earlier speculation that Pakistan would not be able to pay its $1 billion bond obligations. He regretted that “these pseudo-intellectuals keep coming” even after the payments had been made.
He advised investors to disregard the doubters and spread the word that Pakistan would not default. I can demonstrate Pakistan will not default and oppose anyone in any discussion. However, our petty politics and petty goals are harming the nation.
He mentioned that the country had a debt-to-GDP ratio of 74%, compared to 110 percent in the US and 101 percent in the UK. Dar stated that while “nobody there says we are in difficulty and a debt trap,” he could name a dozen Western nations whose debt-to-GDP ratio was greater than 100 percent.
He declared, “We are our own worst enemies.”
The finance minister said that “malicious propaganda” needed to be stopped because it was making people afraid, which led them to buy gold and US dollars in a panic.
“We have serious problems, but that doesn’t mean we can’t get out of this storm.”
Exchange rate gap
He also talked about the difference between the open and interbank markets for the USD-PKR exchange rate. He recalled that as soon as he boarded the flight to Pakistan, the markets had “started behaving positively.”
I had not even accomplished anything comparable to 1999 or 2014. There was a difference of Rs1.5 between the open market rate and the interbank rate, indicating that we were on the right track.
The smuggling of the greenback to a neighboring nation, the import of wheat with its partial subsidy, and the import of fertilisers with its substantial subsidy, according to the finance minister, were the three primary causes of the worsening situation. He added that fertilizer and wheat were also being smuggled in.
Dar claimed that he had asked authorities to stop the smuggling of all three items, stressing that the economy needed to be protected in the same manner as the nation.
“Policing insight offices are giving a valiant effort,” he guaranteed.
Policy rate
Additionally, he suggested that the country’s policy rate, which is at a 24-year high of 16 percentage points, should be decreased.
He gave Turkey as an illustration, where inflation was greater than 60% while the policy rate was only 9%. He pointed out that the Monetary Policy Committee and the State Bank of Pakistan are independent.
He said that inflation was “imported” and that it was linked to the rupee’s depreciation. He also said that the “games that have been played and experiments that have been done” needed to be fixed.
IMF programme
Pakistan’s finance minister stated that the country would finish the ongoing IMF program. He stated that the PML-N government was the first to complete an IMF program in 2016, and that he would work to complete the program again despite the difficult conditions the previous government had agreed to with the IMF.
“They [agreements by past PTI-drove government] are sovereign responsibilities and ought to be conveyed and we are conveying them.
“The effort of my team will be to finish the program twice. However, Pakistanis should not be held hostage. We will perform political management to lessen the public’s burden. Since I took over, my policy has been that we shouldn’t add to the burden if we can’t alleviate it. We have met our promise regarding the petroleum development levy (PDL), but we have also reduced prices three times,” he stated.
“To improve the situation and reduce inflation, we have implemented some policy measures; Both the current account balance and the trade deficit have improved. There is no instantaneous improvement wand. Our system is in place. We won’t fall behind. He repeated, “Everything is under control.”
Dar stated that Pakistan had been classified as a macroeconomically unstable nation in 2013, that multilateral lenders and financial institutions were unwilling to lend the country even one dollar, and that there was a perception that the political party that won the general elections would declare default within six to eight months.
However, he stated, the stock market was the best in South Asia and fifth-best globally within three years, while the Consumer Price Index, which measures inflation, was at 4 percent, food inflation was at 2 percent, the policy rate was 5 percent, and growth was over 6 percent.
We ought to consider the reasons Pakistan has reached this point. By 2030, Pakistan’s economy was predicted to rank 18th overall. Why have we reached the point where we are chasing even just $1 billion at this point in time? I think reflection is needed. We should not repeat the disastrous experiments and mishaps that brought us here today.
He assured that the government was handling the situation while acknowledging that the external account was “the biggest challenge.” We anticipate… we have discovered additional external resources and inflows. By the end of the year, you’ll see that our external account and reserves are in much better shape.
He responded to the concerns of the business community by stating that he had spoken with the SBP governor a number of times over the past week, during which time the central bank had lifted restrictions on the import of essential goods.
He stated that the country’s ultimate objective was to avoid multilateral lending institutions. We should instead return to bond markets, but in order to do so, we will need to enhance our macroeconomic indicators and demonstrate to the world that we mean business and that our economy is expanding,” he added.
