Economy under severe stress, Miftah blames Imran

Mehtab Haider
Saturday, May 14, 2022

ISLAMABAD: Federal Minister for Finance Miftah Ismail Friday alleged that the national economy was under severe stress currently, and the Imran Khan-led Pakistan Tehreek-e-Insaf (PTI) government was responsible for it. He said the former coalition government, led by the PTI, left the economy on the brink of collapse, as they secured the highest-ever loans of over Rs20 trillion during its tenure.

In a statement issued here on Friday, he blamed dollar free flight against Pak rupee, Imran Khan’s deal with the International Monetary Fund (IMF) and then its violation, for an unprecedented inflation in the country. He said the country would have to be steered out of this quagmire, though it was really a tough job.

He also said that Imran Khan had created difficulties in bilateral relations with China and the Kingdom of Saudi Arabia, but now they had overcome all difficulties due to sincere efforts of Prime Minister Shehbaz Sharif.

Finance Minister Miftah Ismail said Imran Khan should respond to the crucial question why the rupee got depreciated from Rs115 to Rs189 against the US dollar during his tenure, as it caused a major price hike in the country. He said the PTI government’s corruption during its four-year tenure, rulers’ incompetence and rule of mafias led to sky-rocketing of prices during this period.

He said that the recent dollar surge and price hike were the direct result of the IMF programme and then breaching of the agreement. He said the agreement, signed by Imran Khan government, would have to be done away with and then the dollar and stock market would be stabilised. He said that Imran Khan had left the economy at a point that it would not be an easy task to put it back on the path of stability. He promised that he would stabilise the economy.

The finance minister said that the subsidy on petrol increased financial pressures on Pakistan. There was differential between the international prices of POL [petrol, oil, lubricant] products and on the rate it was sold by the government in the domestic market; so it caused loss of billions of rupees per month to the economy. Alone in this ongoing month, he said the government faced approximately losses of Rs120 billion, which stand three times higher than the expenditure of running of civilian government. The government, he said, cannot bear with such massive losses. “These are the causes of upheaval in different markets and price increase is on the rise,” he added.

If the government did not have financial resources, and it was forced to provide subsidy, there was no other option but to seek loans, he said and added that it was resulting in hiking the policy rate because the government was obtaining more loans from banks. The PTI had secured the highest-ever loans in the last three-and-a-half years, which was 80 per cent of the total loans. In the wake of increased loan liabilities, he said that the economy was facing immense pressures.

The minister said that the PTI-led government had left foreign currency reserves, held by the SBP, to the tune of $10.5 billion, which could meet import requirements of just 45 days. “It is a dangerous level of foreign currency reserves, which needs to be jacked up,” he added.

He said that the breach of IMF agreement increased Pakistan’s difficulties on the economic front. Imran Khan would have to be answerable for his government’s performance during the last four years. He hoped that the country would come out of the difficult situation and move towards the path of growth and prosperity.

Separately, PMLN Vice President Maryam Nawaz also blamed Imran Khan-led government for the current state of economy. “This is all your doing. Don’t think people are stupid. Answer for the worst performance in four years. You are responsible for bringing Pakistan and its economy to such a state. You will have to answer,” she said in a tweet.

In another tweet, she termed the PTI parliamentarians “liars and blood-suckers of the country”. She said they had tendered resignations but still they were getting salaries. “For what they were getting salaries: destroying the country, or violating the Constitution of Pakistan,” she asked.

Meanwhile, rupee lost more ground on Friday to close at record low for the fourth consecutive session after a persistent decline in foreign currency reserves reinforced concerns over the looming balance of payments crisis, traders said.

In the interbank market, the rupee ended at 192.53 to the dollar, down 0.39 per cent from 191.77 on Thursday. The rupee crossed the 194 level in the open market trade. It closed at 194.70 per dollar, compared with the previous close of 193.

“Investors were worried about the fast depleting forex reserves. There have been import and debt repayments, while inflows are not adequate to meet that market demand,” said a forex trader.

Pakistan’s reserves fell $178 million to $16.376 billion during the week ending May 6, the central bank said on Thursday. The reserves dropped to their lowest level since December 2019.

The central bank reserves also fell to a 23-month low. The SBP reserves decreased by $190 million to $10.308 billion and it attributed the decline in reserves to outflows related to external debt repayments. Analysts said the reserves were enough to cover 1.54 months of imports.

The rupee has lost 18.17 per cent since July this year. Growing trade deficit, dwindling foreign exchange reserves, delay in release of IMF funds and the political uncertainty added to pressure on the currency. The country needs $10-12 billion to stabilise its economy.

Traders said the currency is looking increasingly vulnerable to a swelling trade deficit. The country’s trade deficit jumped 65 per cent to $39.3 billion in 10 months of this fiscal year amid higher imports. In April, the trade gap rose 24 per cent year-on-year to $3.74 billion.

“Due to non-increase in exports and increase in imports, the trade deficit of the country is increasing to an alarming extent, which is putting pressure on the rupee,” said Malik Bostan, Chairman Forex Association of Pakistan.

“At present, $2.5 billion worth of foreign exchange is being spent on import of fuel and gas while vehicles worth crores of rupees are being imported,” he added. He said people have been buying dollars from the free market and keeping them at their homes and people want to sell these dollars but the SBP has banned even sale of a single dollar from anyone without an identity card. “To strengthen the rupee, dollars should be allowed to enter the market.”