All flood expenses details shared, now it’s up to IMF: Ishaq Dar

ISLAMABAD: Minister for Finance Ishaq Dar said on Wednesday that Pakistan has shared all the required information on flood expenditures with the International Monetary Fund (IMF), and now the decision was up to them. He declared in the same breath that beggars can’t be choosers.

While addressing Second Pakistan Prosperity Forum, organised by the PRIME Institute, in collaboration with Fredrich Nauman Foundation and others, Ishaq Dar said that many countries raised tax rates in the aftermath of the Covid-19 pandemic and Pakistan was left with no other option but to jack up its tax-to-GDP ratio.

Dar said he was extending all-out support for Track-and-Trace system and there was a need to broaden the narrowed tax base. “In the last four years, the economic management has totally failed,” he said and added that he was advocating for the signing of the Charter of Economy for the last several years.

He said there were ministries/ divisions which were scared of taking decisions. The security-related expenditure could not be curtailed. The country, he said, was facing challenges on account of debt servicing. He said he had to face victimisation because he advocated fiscal discipline. He said that he had abolished discretionary funding in 2013.

Dar said those involved in the abuse of currency should be checked. He said Pakistan was constrained in foreign currency reserves, so it could not be thrown unlimited into the market and the government could not leave the market to the mercy of manipulators. “The abuses of currency manipulation must be checked as we have constrains of forex reserves. We have recently started operations and Customs captured one individual at Chaman border, who was smuggling $100,000 into the neighbouring country.”

He said wheat was imported but it was smuggled into the neighbouring counties and beyond Central Asian Republics. He said the government was providing subsidies for urea which was being smuggled from Pakistan. Pakistan was importing coal and the rupee was used to buy dollars and being smuggled to the neighbouring country.

Pakistan, he said, was under-pegged currency system till 1999 and then the country went on an inter-bank rate or the real effective exchange rate. There are certain speculators and gamblers and Hundi/hawala who took the country’s currency hostage. If the state does not come into play, then it happens what is currently being experienced here.

The Bank of England did not intervene. Bangladesh and India recently intervened as India could afford as it has $600 billion in foreign reserves and New Delhi threw $98 billion into the market, but we did not have such luxury.

He said that the total public debt and liabilities went up from Rs30 trillion to Rs54.5 trillion under the PTI-led government, which was simply unsustainable. He said the debt burden had gone up mainly because of the rising fiscal deficit and devaluation of the exchange rate. He said it was argued by gurus that with rupee devaluation, export would go sky-high, but it did not happen in the case of Pakistan.

Dar said the flawed model of depreciating exchange rate could not boost exports. He said if the model devised by him would have been pursued by granting an incentive package in 2016 and 2017, exports would have increased on a much higher side; however, the exchange rate depreciation could not boost exports up the desired mark.

The higher debt is problematic, he said and added in the same breath that there was a need to analyse it from another angle, as the debt-to-GDP ratio in the USA stood at 110 per cent and Japan 257 per cent. “Politics must be detached from the economy,” he added.

Finance Minister Ishaq Dar said that under fiscal federalism, whereby the major chunk of resources was shifted to provinces under the NFC Award, the federating units should have provided funds for development projects. If the provinces did not contribute in terms of collecting due taxes, then it would result in hiking fiscal deficit and debt burden, he added.

He said that the export of sugar would only be allowed after verifying stock position as different projections were made before the government; so without accurate data, export of sugar would not be allowed.