Thursday July 07, 2022

Pakistan lost $75 bn due to shrinking GDP, devaluation of rupee: Ishaq Dar

By Our Correspondent
March 02, 2021

ISLAMABAD: Former finance minister Ishaq Dar has claimed that Pakistan’s economy lost $75 billion in the last two fiscal years, mainly because of the shrinking size of GDP and massive devaluation of the rupee against dollar.

He said that the country’s GDP size shrank by $51 billion as it nosedived from $315 billion to $264 billion in the last two fiscal years. The massive devaluation resulted in hiking of the total debt to the tune of $25 billion without getting a penny. “The incumbent regime does not have the capacity to tackle economic issues of the country, so the poor are being fleeced through highest-ever inflationary pressures, especially on food and fuel prices,” the former finance minister Ishaq Dar said while talking to this scribe from London on Monday.

He said that Pakistani masses are now paying Rs300 billion extra on sugar prices. The wheat prices have gone up and the consumer was now paying Rs 1,800 billion against Rs900 billion they paid three years ago. Besides, in the past they were paying Rs1,000 billion as electricity bills against Rs2,000 billion being paid today for the provision of electricity.

He said that he refused to share the details of CPEC with the IMF during one of review meetings at Dubai and told them it was none of their business. He said that a strong propaganda campaign was launched against CPEC, so he had to explain everyone that Pakistan was not taking loan at 8 percent rate but it was Chinese investment for building power plants which they would get back after generating and selling electricity. On the contrary, he said that the PTI government informed the IMF everything about CPEC, which he could prove and dared if anyone could deny his assertion.

He said that through prior action, the incumbent regime devalued the rupee and raised interest rate sky high for getting the IMF loan despite the fact that this government had claimed that they would not take IMF loans. Dar recalled that once the IMF had demanded devaluation in presence of then-secretary Finance and Governor SBP during the 9th or 10th reviews of the last IMF programme when he claimed that he threatened to walk out from the meeting by forbidding them from instructing the volume of rupee devaluation against the dollar.

He said, “I can guarantee that had there been no drama of DawnLeaks and Panama, there was no need to go back to the IMF in 2018.” He said he managed Pakistan’s economy after nuclear explosions, so he knew how to manage the economic difficulties.

Pakistan’s economy does not operate on Chinese model, because we do not have exportable surplus, so devaluation does not boost exports. The effects of devaluation evaporate within a 5 to 6 weeks period and do not help boost exports, he added.

Regarding the public debt, he said the incumbent rulers had committed to reduce the public debt and doubling the tax revenues from Rs4,000 billion to Rs8,000 billion in one year but the tax collection showed only 6 percent growth instead of 60 percent. Thereby, the public debt liabilities peaked to Rs44.5 trillion against Rs29 trillion. Lacking transparency, the government committed Rs24 trillion as public debt to Rs48 trillion in five years and gave that in writing to the international financial institutions, he challenged.

Ishaq Dar said that it was a blunder that the PTI government allowed free fall of the rupee but that did not increase the exports. In fact, it caused losses in terms of GDP growth. The IMF projected Rs120 against a dollar but when they allowed free fall of the rupee, it touched Rs160, Dar lamented.

The interest rate went up by 13.25 percent, resulting in increased debt servicing from Rs1,500 billion to Rs2,900 billion. Thirdly, they failed to increase revenues and fourthly they could not curtail expenditures.

All this resulted in self-created crisis plunging Pakistan into a serious debt trap. The inflation, he said, was rising and it has gone up manifold for low-income group and added the vicious circle needs to be broken.