Pakistan won’t need IMF again, Umar claims

–Finance minister says govt trying to bridge $12bn financing gap through policies, bailout programme

–Says economy improving as exports have increased, imports are down, remittances have grown by 13%

KARACHI: Finance Minister Asad Umar Saturday said that Pakistan would not need another International Monetary Fund (IMF) bailout after this one as the country is on the road to recovery.

The finance minister was addressing traders at the Pakistan Stock Exchange (PSX) to allay concerns about the present condition of the economy and after weeks of volatile trading at the PSX, which had plummeted the stocks to new lows.

“This will be the last IMF programme,” he said, slamming the media for portraying that the country’s economy was collapsing. “That is not the case. No alarm bells are ringing,” he added.

But he explained that “this year there is a financing gap of $12 billion”.

“Right now, we have an $18 billion deficit and $9 billion of debt repayment due this year, which brings the total to $27bn. Pakistan cannot afford that,” he said. The minister said that certain segments of the society will have to bear this pain, but if it is ignored right now and policies are not implemented, then the consequential pain will be far greater.

“After taking monetary and fiscal measures, in my opinion, our financing gap for this year will be around $12 billion. That sum we are trying to solve through a package, which will include one-time inflows as well as elements of trade financing.”

Umar assured that there will be a visible growth in the country’s exports this year as the data of the first quarter shows that exports are up, imports are down and remittances have grown by 13 per cent, a sign that the country is going in the right direction.

The finance minister was of the view that by the third year of the incumbent government, Pakistan will reach a break-even point, and after that “you will see growth”.

“In the next seven to eight months, the US dollar will see a decrease of 26 per cent to 27 per cent against the Pakistani rupee,” he said, adding that “matters are coming under control”.

“The current account deficit, which earlier rose from $2.5 billion to $18 billion, has started to decrease,” Umar elaborated.

Speaking with regards to the stock market, the minister said that “there is astounding growth in the stock market and efforts should continue for better results”. He, however, agreed that measures need to be taken in order to improve the market’s conditions.

“We will work for the betterment of the capital market and improve the overall atmosphere for investment,” the minister promised, but stressed that the stock market’s fortunes are directly linked with the economy’s health.

“If the economy will grow, the market will grow.”

“Doing business in Pakistan has become very expensive,” and “the environment for investment and business needs to be improved”. “We will also work on improving the capital market,” he added.

He assured the gathering of stockbrokers and traders that they will work to improve Pakistan’s ranking in the ease of doing business to 99 from the current 147 at present. For this purpose, his government has set up the Council of Business Leaders.

The council under the leadership of Prime Minister’s Adviser on Commerce Abdul Razak Dawood has been tasked to look into the matter and suggest measures. He further said that taxation “needs to be fixed and the market needs to be regulated, but not over-regulated.”

Regarding traders’ short-term concerns, the minister said that while “trading is a good thing, we also have to stay within our resources.” The finance minister also observed that some importers “have made substantial sums from devaluation in the past 12 months by selling inventory they had purchased on old prices”.

The finance minister defended his policies aimed at curbing imports, saying: “The country was heading rapidly towards bankruptcy. I have to save 210 million Pakistanis.”

Umar explained that had he not taken swift measures to curb imports, the rupee “would have been devalued by 100 or even 200 per cent instead of just 27 per cent”.

“We are familiar with the current economic situation, the issues faced by the country and its industries cannot be solved through people’s wishes,” FM Umar said. “Petroleum products are Pakistan’s biggest import. We have reduced taxes on petroleum products,” he said, adding that gas tariffs for the export industry have not been increased.

Later in the day, the finance minister had a similar sitting with the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), whose queries regarding the economy and economic measures he answered.

Umar said that a quick fix to jump-start the economy is to enhance the credit creation capacity of the banking sector, something he said will cover the financing needs of both the government and the public.

“Right now our cash-to-deposit ratio is 37 per cent,” he said. “We are targeting for this ratio to be brought down to 25 per cent. If we manage to do this, Rs2 trillion’s worth of credit creation capacity will be enhanced. This is where the financing for the housing scheme will come.”