Forex reserves to exceed $21 bn by month-end: Dar

Addresses Jang Group’s seminar on ‘Role of Islamic Banking’; Pervaiz Rashid hopes Islamic banking will flourish; Mansha sees great scope for Islamic banking in country; SBP governor stresses Islamic banking’s role in agriculture, SMEs, low-income housing; Meezan Bank CEO seeks media role to promote Islamic banking; Al-Baraka CEO says Islamic banking provides all facilities like all other banks; Bank Al Islami chief claims non-performing loans of Islamic banks very low; NBP president says converting existing branches into Islamic ones for better business; Iftikhar Malik wants grievances of traders’ community on tax collection addressed

Shahid Aslam

LAHORE: Finance Minister Ishaq Dar has assured that the foreign reserves of Pakistan will exceed $21 billion by the end of this month due to the effective policies of the incumbent government.

He also underlined the need for formulating and implementing a ‘Charter of Economy’ through broader consultation with all stakeholders to make speedy development a reality.

The minister was addressing a seminar on ‘The Role of Islamic Banking in the Economic Development of Pakistan’, organised by the Jang Group here at the Royal Palm Country Club.

Federal Information Minister Pervaiz Rashid, State Bank of Pakistan (SBP) Governor Ashraf Mahmood Wathra, SBP Deputy Governor Saeed Ahmad, MCB Chairman Mian Muhammad
Mansha, Saarc Chamber Vice President Iftikhar Ali Malik, Al Baraka Bank Pakistan Ltd CEO and President Shafqaat Ahmed, Meezan Bank CEO and President Irfan Siddiqui, Bank Al Islami CEO Hasan A Bilgrami, HBFCL MD Pervez Said and NBP President Syed Iqbal Ashraf also spoke on the occasion.

The finance minister called upon all stakeholders in the economic sector to work for sustainable development, and added that he had already started the process of giving a three-year medium-term macro-economic framework with every budget. But, it could be made more effective with a broader consultative process, as collective wisdom is always better, he added. “So, we should work to make it clear where we want to take this country,” he said.

After winning the Election 2013, Dar said, there were three major challenges facing the Pakistan Muslim League-N government: terrorism, energy and economic revival, and the government took them head-on. “We have almost grasped all these major challenges by ensuring remarkable achievements in these directions, he claimed.

He said tax recovery had increased significantly from a mere three per cent to a mammoth 16.5pc. The government has increased growth rate in taxes to 20pc for the next year. The GDP growth rate has been increased to 4.5pc from 3pc, which is highest in the last seven years. The government wants to jack up the GDP growth rate to 14-15pc to give national economy real impetus, saying that then there will be no deficit.

The minister vowed to add 10,000MW electricity to the national grid by 2018, to overcome the power shortage. “There is no switch on and off button. We are working to tackle these issues head on. We will not stop at increasing power generation by 10,000MW, but are taking steps to further add 14,000 megawatts in the years to come.

He said the government would take steps for resolving issues with traders. “We will remove their fears about tax regime and increase tax collection with their help.” He warned that no tax official would be allowed to create any problem for traders. Instead of bribing tax men Rs40,000 a year, traders should only pay 20,000 formally to the government, he added. “We will give simplest system to trader,” the minister promised.

Ishaq Dar said the PML-N government had always promoted Islamic banking and financing and today, Islamic banking had a share of 13.1pc in deposits and 11.2pc in lending in the overall banking sector of the country.

He said the government made tangible advancement on the front of tackling terrorism by initiating the operation in various parts of the country including Waziristan and Karachi. The efforts of the law-enforcement agencies helped restore peace in these areas, which is a big success, he added.

The government had incorporated the suggestions of the Islamic banking leaders in the budget since its coming to power. He said due to the government policies, national level banks are opening branches of Islamic banking in every city of the country. The Islamic banking system is not only being discussed and strengthened in the Islamic world but also in the West.

After the global recession of 2007-8, in which billions of dollars institutions faced bankruptcy and a few hundred others were eroded, there was a great awareness and realisation in the world about the Islamic banking that was on the rise in the world. The West, he added, was adopting this system on commercial gains basis and “being a Muslim we should adopt it according to our religion and constitution.”

“Islamic banking will take you to real economic activity; protect you from speculations; link your risk to your returns, ensure formation of your wealth, and this system will also result in equal distribution of income,” the minister believes. The government, he added, wanted to switch over the country’s economy from conventional to Islamic mode as early as possible.

However, he added, adoption of Islamic banking would take time as its conversion would have to be made gradually. It cannot be done overnight, he added.

Forming a steering committee on Islamic banking was among the first few steps he took soon after assuming the office of finance minister in 2013, Dar said, adding that Islamic banking was the only way forward. He said they have made commitment to promote this banking in the country.

The minister said the Ministry of Finance prefers Islamic banking in any public sector borrowing. He asked the Islamic banking industry to give loans to agriculture sector and the Small and Medium-sized Enterprises (SMEs), as it would lead to real development in the economy.

He said in 2011-12, Pakistan economy was declared unstable and prone to become a defaulter. He ensured payments of all loans. No country was then ready to buy Pak bonds, but today Pakistan’s bonds including Sukuk got unprecedented response at global level.

In only two years, the PML-N government managed to stabilise Pakistan economy to the level that today 22 credible institutions of the world had declared Pakistan economy much stable, he added.

The minister said the PML-N government managed to bring down budget deficit to 5.3pc from 8.8pc and would soon lower it further to 4.3pc in the coming June.

Dar said Prime Minister Nawaz Sharif had the vision and plan to take Pakistan forward on all fronts and the PML-N government did not plan up to its tenure but make long-term policies and planning with all sincerity to bring the country at par with developed nations.

“I am thankful that the Jang Media Group organised an important conference, where the government and private sector are sitting together not only to discuss important national issues but also to seek guidance from each other.”

Later, talking to reporters, Ishaq Dar categorically rejected the media reports about NAB (National Accountability Bureau) investigation against him. He said the media organisations which published or aired that news had already contradicted it. Dar said he had worked as the finance minister for four times and he could be held accountable for any sort of corruption.

The minister said new taxes had been imposed only on imported luxury items and those taxes did not cause any price-hike in the country.

SBP Governor Ashraf Mahmood Wathra, addressing the seminar, said the Jang Group was not only an important source of information but it was also shaping public opinion. He said he was happy that the media had started taking keen interest in the fast growing Islamic banking and financial sector.

He said the success ratio always increased with the entry of such familiar/ renowned media house like the Jang Group in promoting the cause of Islamic banking in the country. He said the topic was well chosen, keeping in view the changing world scenario vis-à-vis financial affairs.

About Islamic banking, he said risk and reward sharing in Islamic financial system constituted foundation of real economic development. He said as agriculture contributes a major chunk to country’s economy around 21pc of the GDP, it should be given due importance. He said at present banking sector of the country is fulfilling 50pc of the needs of the agriculture sector.

He said currently Islamic banking in the country is growing at an effective pace adding that during the last decade and a half, assets of Islamic banking reached at 11.2pc of the total banking industry, whereas share of Islamic banking reached at 13.1pc in the total deposits of the banking industry. He said such a growth could have not been witnessed had the SBP not provided it roots of regulatory, supervisory and Sharia.

We should not be satisfied as competitive gains have yet to be achieved in Islamic banking and financial affairs. He said share of Islamic banking is very meagre in agriculture, SMEs, low-income housing, etc, which need to be increase. Under the strategic plan 2014-18, deposits for agriculture sector should be increased by five per cent and loans should be increased by 10pc.

SBP Deputy Governor Saeed Ahmad told the audience that the incumbent government, central bank and SECP have played an active role in promoting Islamic banking in the country. He said budget deficit had been lowered by the government. However, it is evident that budget deficit needs to be focused in future. Capital expenditure of the budget should be financed through Islamic budget. He said stocks could also be financed through Islamic banking and its return could be given in terms of relaxing taxes liabilities for individuals or entities.

The government should take advantage of the Islamic banking for financing commodity business, which is being done by the Punjab government, he said, and termed it a successful venture. Social sector can also be financed through Zakat and Ushar etc, but collection will have to be taken care of properly.

Meezan Bank CEO and President Irfan Siddiqui, praising the Jang Group for organising the conference, said the media has a very important role to play in promoting the cause of Islamic banking in the country. He said the Islamic banking has led to greater financial inclusion as it provided an opportunity to those who otherwise refrained from dealing with the conventional financial institutions.

He hailed the biggest Sukuk of over Rs300 billion for Karachi Airport, saying it is a good opportunity for the Islamic banking industry.

Al-Baraka Bank Pakistan Limited CEO & President Shafqaat Ahmed, speaking on the occasion, said such events needed a lot of awareness and he was happy that the Jang Group being the forerunner of media was helping to make people understand the Islamic banking.

He said such events help in clarifying misconceptions about Islamic banking, adding the environment was very supportive and conducive for the same purpose. He said Islamic banking was providing all facilities other banks did offer.

Bank Al Islami CEO Hasan A Bilgrami said on the occasion Islamic banks were performing very well due to enabling environment. He said non-performing loans (NPLs) of Islamic banks were very low, saying out of such top five banks, two are Islamic banks. He extended full support of Islamic banks to the government for infrastructure development.

NBP President Syed Iqbal Ashraf said on the occasion the environment for Islamic banking was very supportive. He said his bank has redefined its role toward a modern bank. He said in 2013, the bank introduced new concept of Islamic banking in the country with the launch of new brand. In 2014, following certain steps, it was able to finally took off. With current expansion, the NBP has emerged as the third biggest branch networks among Islamic banks in the country.

“We have adopted strategy to convert existing branches into Islamic one, keeping in view potential of this sector,” he said and added 150 more branches would be added by the end of 2016 through this process. “We also want to establish a subsidiary in 2016 with paid up capital of Rs6 billion.”

He said the Islamic banking industry should take steps for taping potential of agriculture sector. He said such step would strengthen economy and create jobs across country.

Iftikhar Ali Malik said Islamic banking helps in developing a society where equitable sharing of resources could be done. The Islamic fund is one of the fastest growing segments within the banking sector, he said adding that more steps should be taken to make Islamic banking a success in the country. He also asked the incumbent government to take steps for redressing grievances of trader community regarding tax collection.

HBFCL MD Pervez Said, speaking on the occasion, said the present team of Islamic banking was very strong and doing very well. The commitment shown by the team was helping a lot in transforming Islamic banking industry. He also praised the role of SBP governor for regulating Islamic banks. He also threw light on gradual but huge success of the Islamic banking industry in the country. However, he said, share of Islamic banking is far lower than its true potential.

Information & Broadcasting Minister Pervaiz Rashid said Pakistan Tehreek-e-Insaf Chairman Imran Khan has adopted Prime Minister Nawaz Sharif’s doctrine of foreign policy as he met Indian premier Narendra Modi in New Delhi, a few days back.

“There is a philosophy in the doctrine of foreign policy of PM Nawaz Sharif and Imran Khan has accepted the same. I hope he would accept PM’s internal policy as well,” the minister said after taking part in the Jang Group conference.

However, he criticised Imran saying the cricket-turned politician proved to be a player instead of a politician when he met Narendra Modi. Instead of discussing all outstanding issues including the issue of Kashmir, he discussed only cricket, he added.

“Imran Khan should have the courage to discus all issues with Narendra Modi when he met him on Friday.”

Commenting on Karachi operation, the minister said the operation would go on till elimination of all terrorists, adding NAB was doing its job as per law. NAB should probe all matters on merit and produce strong and undeniable evidence against the accused so that no one could criticise it.

Earlier, speaking at the conference, Pervaiz Rashid said he was a stranger to the issues related to economy but he was hopeful that the mangers of Islamic banking would address key points to make it a success. He hoped the Islamic banking would flourish in the country as well as in the world in the days to come.

MCB Chairman Mian Muhammad Mansha said on the occasion his financial institution was the first bank which offered Islamic Window back in 2002, but we realised that Islamic banking has its own needs. Having made progress since then, he added, “I also realised that we could not run proper Islamic Banking Division within conventional banking because issues were quite different.

“The customers’ nature and religious beliefs of people are different. We also gained some experience with investment in Maybank which came in 2008,” he added.

However, during the incumbent government, with the help of SBP authorities, we came with the plan that probably every bank needs a complete subsidiary to have independent banking. “Therefore, we applied for a new bank and by the grace of God the first branch of the bank was opened about fortnightly back.

“Hopefully, we will add another five branches in a month and then with regulatory mechanism in place, we will merge already opened 37 branches into new subsidiary hopefully by June next year, he added.

“I am a strong believer that there is a place for Islamic banking products,” Mansha said and adding this is also the largest growth segment in the banking sector in Pakistan.

“In certain areas, people are more inclined to opt for the Islamic banking, especially living in the bordering areas with Afghanistan both in Balochistan and KP.

“So hopefully, the subsidiary we have set up with Rs10 billion capital should do great things for Islamic banking,” he added.

“We are very lucky country of the world that we have one of the best banking systems,” saying the SBP is a good regulator. He said if someone picked up balance sheet of MCB in New York, he will not even believe numbers he would see, saying our adequacy ratios and our capital are so great. The privatisation of banks by the then Nawaz Sharif government in 1991 gave stimulus that after facing so many international crises in the ensuing period, our banks sailed through these period.

Pakistani banks are in strong hands mainly due to regulatory framework of the central bank, he said and adding State Bank of Pakistan is a shining example in this regard.

To overpower terrorism and extremism, Mansha said we have to take measures to offer jobs to educated youth as well because literate people have been found involved in recent terrorist activities as they are not coming from Waziristan. If you cannot give jobs to youth after clean up of society, he warned, you will face same problem again and again. So we need to now go into expansion mode and grow somehow.

In his concluding remarks, Sarmad Ali of the Jang Group, Pakistan’s largest media conglomerate, said the incumbent government should take concrete efforts for making Charter of Economy a reality, terming it indispensable for smooth economic, business and industrial activities in the country.

Irrespective of the fact that there is PPP, PML-N, PTI or JI or any other party in power, the national economic agenda should be the same, he said. All stakeholders including political parties, business and industrial community, media and other important spheres of society should be consulted to formulate Charter of Economy. This document should constitute foundation of our economic policies for next 10 to 25 years’ plan. Finance Minister should lead this initiative as it will be a great service for the nation.

He said today’s conference is ever events organized as part of Jang Group’s new brand ‘Jang Conferences’. He added that such events covering social, political, economic and cultural issues would be held in every two months.

He also eulogised services of SBP for regulating business of Islamic Banking.

He thanked all participants of the conference.