‘IMF fears true but no dictation’

ISLAMABAD: Adviser to Prime Minister on Finance Dr Miftah Ismail said that the Net International Reserves (NIR) calculated by the IMF were negative which was done with different methodology but added that with currency reserves of over $12 billion held by the central bank, they were comfortable of meeting all obligations.

“My boss is Prime Minister Shahid Khaqan Abbasi and political boss is Nawaz Sharif and IMF is not my boss,” Adviser to PM Miftah Ismail said while addressing a hurriedly-called press conference here at the Q Block (Finance Ministry) on Friday.

The previous Free Trade Agreement (FTA) with China, he said, had not taken care of domestic problems of the local industry and hence the Commerce Ministry was extra-cautious to have detailed consultation with the local industry.

The FBR had some reservations about the terms of revenue loss over the next FTA with China, but the prime minister ruled out these concerns and directed that new arrangement should take into account the greater impact on economy.

The confident adviser to PM on finance seemed upbeat about the country’s economy and said that the national economy was expected to achieve six percent growth -- the highest ever in the last 10 years in outgoing fiscal year 2017-18. The FBR’s collection, he said, showed impressive results, indicating that the business activities were on the rise in the country, adding in the same breath that the current account deficit had gone up mainly because of China Pakistan Economic Corridor (CPEC).

Regarding the next budget priorities, he said that the government would focus on higher growth and curtailing inflation in the upcoming budget which would be unveiled on April 27, 2018. He said that the public sector employees would be compensated in the budget in line with inflationary pressures.

On the other hand, he said that exports, foreign remittances and foreign direct investment were also rising -- all the three contributors to foreign exchange inflows.

“Our foreign currency reserves stands at $12.5 billion and sufficient to meet debt repayments for the current year,” he said adding he did not agree to a questioner that net foreign exchange reserves of the country were in the negative but conceded the International Monetary Fund (IMF) had a different methodology to look at forex reserves without taking into account its own loans.

Responding to repeated questions about IMF observations about the government’s commitments, Dr Miftah said he was answerable to Prime Minister Shahid Khaqan Abbasi and PML-N supreme leader Nawaz Sharif as to how to take the country forward and not to the IMF.

He argued that the net foreign exchange reserves should be treated as negative $50 billion based on $70 billion debt of the country and total reserves of $20 billion or so, but you don’t have to look at absolute numbers in such cases. The debt limitation law, he said, talked about debt to the GDP ratio and not about absolute numbers, so the debt to GDP ratio was under control because the size of the economy was growing faster than the growth in debt. He said that the country’s growth trajectory was rising as it would touch six percent this fiscal year and could touch seven to eight percent in coming years.

He deplored that singling out one indicator was also not fair; otherwise, Japan’s debt was almost 120 percent of the GDP while many developing countries had 70-80 debt to the GDP ratio and were doing well.

To another query about describing economic stability achieved through artificial methods, he said no one could deny that Ishaq Dar had inherited a GDP growth rate of 2.8 percent and fiscal deficit of 8.2 percent and inflation close to double digits but he had turnaround the economy.

Regarding privatisation of Pakistan Steel Mills (PSM), he said that decade ago its sale was at attracted Rs22 billion, but it was cancelled by the then chief justice, and, so far, this entity had eaten away Rs200 billion of the national exchequer.

He said the PSM was not paying even running gas bills despite repeated commitments compared to K-Electric that agreed to pay current bills along with 20-30 percent of past bills. Both had huge past payables, he agreed.

On the issue of power sector, he said that the government had earmarked Rs115 billion tariff differential subsidy out of which Rs50-60 billion had been paid to be followed by Rs20-30 billion payments by Monday next and then Rs30 billion in another 2-3 weeks. The government was servicing circular debt parked into Power Holding Company (PHPL) through tariff while the fresh circular debt was not a big problem as a plan was already in place to ensure book entries and payments to IPPs to the tune of Rs80 billion through raising loan from banks.