No question of Pakistan’s default: Miftah Ismail

KARACHI: Minister for Finance Miftah Ismail has said the IMF programme has been restored and the country will not default despite the fact that the floods have wreaked havoc on the country and its economy. In fact, he assured that in the coming months with increasing dollar inflows, the economy will also stabilise. Ismail also announced a reduction of electricity tariff from October and to provide cheaper power to the public. The federal finance minister was talking to Geo News Naya Pakistan anchor Shehzad Iqbal on Saturday.

Minister for Finance Miftah Ismail said ahead of the floods, they believed that following restoration of the IMF programme and release of the tranche, investors confidence would gain strength. While the forex reserves did improve, but immediately afterwards the disastrous floods hit the country, destroying Sindh’s entire cotton and date crop, and inflicting major damage to the rice crop in the province. This has a direct bearing on the exports as we will not be able to export rice and at the same time will have to import more. This scenario triggered an apprehension that the country was heading for default but we believe that once we satisfy the market that there is no likelihood of a meltdown, the rupee’s value against the dollar would improve.

The finance minister told Shehzad Iqbal that in the first three months of the fiscal July, August and September, exports will rise, while imports will also be less than that of the last year. Expressing the confidence that Pakistan would never default, Ismail said that tough decisions of increasing the POL prices and power tariff have been already taken, which paved the way for the restoration of IMF programme and that alone is the biggest guarantee against default.

The massive deluge and the disaster it caused have drawn global empathy and solidarity, the finance minister said. The Asian Development Bank will give us $1.5 bn in October, whereas the World Bank and China would also give $500m each. Besides the World Bank will also give us another $1.5bn in the wake of floods. He said Pakistan is paying 7 per cent interest on Roshan Digital Account and 4 per cent on Saudi deposits. The country’s foreign bond yield has jumped to 30 per cent from 24 per cent on credit default risk. Qatar is investing $3bn on LNG, airports, the solar power sector and the stock market. The UAE and KSA have also pledged investments of another $1bn each. Another friendly country has offered $1bn oil on deferred payments. In fact, China has deposited $4bn, KSA $3bn, and UAE $2.45bn for rerolling, the finance minister said.

The State Bank of Pakistan has given a show cause notice to eight banks for selling dollars at higher rates than the prevailing market rate. We will take action against them once they submit replies, Miftah Ismail said. He said with these steps, the rupee will strengthen and the dollar’s value must come down. The finance minister said the State Bank does not have enough reserves to interfere in the market, besides we have an understanding with IMF that prevents any intervention from the bank.

The minister announced that the fluctuation in prices of POL is likely to be announced today (Sunday). “We have already abolished FPA for 300 units of electricity,” he said and added the FPA was neither charged in August nor in September. Whether it will be charged at all is a decision that remains to be reviewed, Miftah Ismail said.

Ismail said PMLN Vice President Maryam Nawaz is correct when she advises against passing the economic burden to the public and Prime Minister Shehbaz Sharif has already done that. We have reduced electricity bills for 75 per cent of users. We are providing power at a per unit cost of Rs30-35 instead of Rs 80 and it can’t be reduced anymore as we also have to consider the rising circular debt. The power tariff would drop from October, providing cheaper electricity, he announced.