Pakistan underwent a major breakthrough in talks with the International Monetary Fund (IMF) as a Finance Ministry official said the Fund would jack up its $6 billion package to $8 billion for the cash-strapped country.
The development comes shortly after the lender’s decision to send a mission to Pakistan next month after it held “several meetings” with Finance Minister, Miftah Ismail, in Washington.
Following his meetings with the International Monetary Fund (IMF), Mr. Miftah Ismail affirmed that Pakistan has “not defaulted” in its over 70-year history and will not do so in the future either. “The Government of Pakistan has not defaulted in its 70-year history and will not default in the future as well,” the minister said with certainty.
Addressing a press conference alongside State Minister for Finance and Revenue, Dr. Aisha Ghaus Pasha, Miftah said that dealings and commitments carried out during ex-prime minister Imran Khan’s tenure were with the State of Pakistan, therefore, the incumbent government will abide by those dealings.
“We [the coalition government] are responsible for that and the loans Imran Khan took, we are responsible for that as well,” the finance minister told reporters in Washington.
He added that even the commitments related to the China-Pakistan Economic Corridor (CPEC) that the previous government made were now the responsibility of the new government.
However, Miftah admitted that there were a lot of budget deficits, adding that when such a situation arises, it is funded via loans. Hinting at his future plan, he said that the new government would try to reduce the debt-to-GDP ratio by increasing the latter.
“If our national income is increased rapidly, and loans are not increasing that rapidly, it means we are okay,” said Miftah.
When asked if he would miss the target this year, Miftah agreed that the debt-to-GDP ratio “should be low every year.” However, he added that if it does not happen in a single year, it is fine as long as the trend is moving towards that.
As far as his government’s targets were concerned, Miftah said that the new government’s target will be to ensure that the country’s reserves are higher than what they inherited. When asked about the IMF’s demand of curtailing the fuel subsidies, the Finance Minister emphasized that the government cannot afford it and needs to be rolled back.
To explain his point, the minister said that if he fills his car with petrol, the government provides him with a subsidy of Rs. 1,600. He added that since he was a factory owner and if 15 of his trucks travel from Karachi to Islamabad with goods, at least 1,000 liters of petrol is used.
The minister said that the government gives an “Rs. 50,000” subsidy, which would mean that he and his family are getting a subsidy of Rs. 750,000 each. “Remember one thing: subsidies that are given in Pakistan go to the rich. This a global problem but in Pakistan, the problem is more pronounced,” he added.
The Finance Minister said that if he allocates Rs. 400 billion to the Benazir Income Support Programme (BISP) in the budget, then people create a fuss over it. “But you see how much loans you have given to the rich,” said Miftah.
The minister said that the government needs to decide whether an average car owner should be given a subsidy if the “reserves” allow it.
“If your government is giving double subsidy to run your car. Does our pocket allow that? I say leave IMF’s point, Miftah Ismail is saying himself that we cannot afford this,” said the Finance minister.
