• Shamshad says caretaker govt prioritises tax net expansion, targets retail and real estate sectors
• Insists subsidies not viable, urges exporters to shift business model
• Says economic revival plan to be unveiled soon
• BISP to be partially transferred to provinces
ISLAMABAD: Pakistan is seeking around $11bn in bilateral support from China and Saudi Arabia as the caretakers push for expanding the tax net effectively to retail, agricultural and real estate sectors while continuing a crackdown on illegal currency movements to fill external and domestic resource gaps so that the
IMF programme remains on track to ensure economic stability until an elected government takes power.
This was part of a detailed policy statement issued by caretaker Finance Minister Dr Shamshad Akhtar before the Senate Standing Committee on Finance and Revenue, presided over by Senator Saleem Mandviwalla in Islamabad on Thursday.
Dr Akhtar also talked about partially transferring the Benazir Income Support Programme to provinces under an IMF requirement. She lamented that exporters were still seeking subsidies despite economic challenges and strongly ruled out the possibility of such freebies.
She said the government was currently working on an economic revival plan that would be presented to the caretaker prime minister shortly and shared with the Senate Standing Committee on Finance.
She said the caretaker government had a limited scope to undertake deep-rooted structural reforms but promised to deliver on reforms that were part of the IMF programme to ensure the disbursement of a $700 million loan instalment. Talks with the IMF would begin by the end of October in this regard.
The finance minister said it was the government’s priority to deliver on the Fund programme to ensure economic stability and continuity.
‘Financing needs still higher’
On the external financing gap, Dr Akhtar said the country’s financing needs were still higher, but with the joint efforts of all stakeholders, the government would be able to secure disbursements from the project pipeline and also revive some policy-based financing from multilaterals.
External flows would improve with the $700m flows from the IMF. For net bilateral financing of $11bn, China and Saudi Arabia had been requested along with a request for a Saudi oil facility, she said.
“To meet the external financing requirements, we are working to secure concessional funding from multilaterals (World Bank, Asian Development Bank, Islamic Development Bank) of $6.3bn,” she said in her written statement, adding that the IMF had already approved $3bn and bilateral assistance of around $10bn was also expected.
She explained that under the current IMF loan deal, the authorities were committed to increasing State Bank’s reserves to $9bn (2.3 months of import cover) shortly and to $12bn (three months of import cover) by June 2024 based on higher official inflows and pick-up in Foreign Direct Investment (FDI) under the Special Investment Facilitation Council (SIFC).
side included about Rs3.2tr power circular debt and an almost similar gap in the gas sector and the ever-bleeding Pakistan International Airlines.
She said Pakistan was not in a position to provide subsidies and duty drawbacks to industries and exporters, who would have to change their business models to invest in exports themselves. Only countries having $400bn in foreign exchange reserves could afford that, she said.
She said the gap between the demand and supply of dollars was reflected in the current account deficit, which declined $2.4bn (0.7pc of GDP) in FY23 from $17.5bn (4.7pc of GDP) in FY22 and further dropped by 54pc in the first two months of this fiscal year to $900m.
Last year, there was a 14pc decline in workers’ remittances, which fell to $ 27bn from $31.3bn a year ago. During the first two months of the current year, remittances have dropped by 8.5pc.
When the caretaker government took office in mid-August, the dollar was trading at 295 to the rupee in the interbank market, a decline of 45pc since June 2022. The open market rate was even higher at 304, with spreads of around 3pc to 7pc.
The rupee’s devaluation was a major driver of record-high inflation last year, Dr Akhtar said, adding the government had taken action against the speculative activity of the exchange companies, resulting in a stronger local currency.
Shamshad says caretaker govt prioritises tax net expansion, targets retail and real estate sector; says economic revival plan to be unveiled soon.
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if they really want to that - it's possible
