No panic over IMF bailout package: Asad

Updated January 25, 2019

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Finance minister says country will neither "go down on its knees" nor take dictation for economic support. ─ BBC News screengrab
Finance minister says country will neither "go down on its knees" nor take dictation for economic support. ─ BBC News screengrab

ISLAMABAD: Finance Min­i­ster Asad Umar on Thu­r­sday said there was no panic in Pakistan over a bailout package from the Inter­na­tional Monetary Fund (IMF) and the country would neither go down on its knees and surrender before anybody nor would it take dictation for economic support.

“I understand where this question is coming from. They are worried why we are not going down on our knees; we will not go down on our knees and there is no need to go down on our knees,” the minister shot back when a questioner said the feeling among the Washington-based multilateral lenders was that Islamabad was taking expensive loans from alternative avenues instead of cheaper support from the IMF, World Bank and International Finance Corporation (IFC) at almost zero markup.

Mr Umar was speaking at a post-budget news conference along with Adviser to the Prime Minister on Commerce and Industries Abdul Razak Dawood, Minister of State for Revenue Hammad Azhar and Federal Board of Revenue chairman Dr Jehanzeb Khan.

“I have worked with the IFC and no one would be a bigger fool if he thinks they provide loans at no cost,” the finance minister said, adding that the financial support provided by Saudi Arabia, the United Arab Emirates and China was not even half of 8-9 per cent. He said Saudi Arabia had provided the deposit at about 3pc return and almost the same rate was on the UAE loan. Mr Umar went on to vent his displeasure over the question. “This is not that country, it’s a country of 210 million people who are of independent nature, who are honourable and take independent decisions. We are not taking dictation. There is no need to take dictation and we will not take anyone’s dictation.”

But he hastened to add that he was in continuous contact with the IMF and would hold another video conference on Friday with the Fund mission. He said the gap between the position of the IMF and the government had reduced and Pakistan would take a Fund programme when it was conducive to the people of Pakistan and there was no panic on that front as international swap rates were also getting better.

Meanwhile, the IMF resident representative in Islamabad, Teresa Daban Sanchez, had other ideas. “We are still evaluating the reform package,” she told Dawn in a late-night message. “Our understanding is that it includes a set of tax, administrative and regulatory measures aimed at lifting distortions that could foster private sector activities. That said further tax measures are needed to increase revenue collection in the short term to support efforts to stabilise the economy.”

The finance minister revealed that an economic support package had been finalised with China and more such successes would be available over the next two weeks — perhaps a reference to the prime minister’s recent visit to Qatar. He said exports had started showing improvement and imports compression, leading to a substantial reduction in the current account deficit. “All these unprecedented successes have helped us address the immediate balance-of-payment (BOP) crisis and current account challenge that PTI government faced at the outset,” he added. Razak Dawood chipped in, saying the agreement had been reached with China for the financial support and a team would now visit Beijing next week to finalise how much rice, sugar and textile products from Pakistan should be exported to China.

Read more: What does the future of regional trade in South Asia look like?

The finance minister said a cabinet meeting presided over by Prime Minister Imran Khan on Thursday had approved a settlement plan for dispute over Gas Infrastructure Development Cess (GIDC) with various industries. The plan would now go to parliament for amendment to become law, he said, but declined to say how much revenue the government was targeting to recover from this head.

Responding to a question, Mr Umar hoped the country’s fiscal deficit would remain under control and within limits and about Rs170bn revenue shortfall faced in the first half of the current fiscal year would be recouped through expected recoveries from held-up funds in GIDC and some other administrative measures by the FBR without any additional taxation in the second supplementary budget, except an increase in duties on big imported vehicles.

He said the amendment to the GIDC law would provide an opportunity to gas consumers to pay half of their arrears of 2012-15 and get 50pc relaxation for future rates to end disputes in courts. He expressed the hope that the government would get partial recoveries of the past and secure a revenue stream for future and end a financial risk hanging over various industries which were in courts.

The minister said the GIDC discount of 50pc for fertiliser would be allowed on the condition that fertiliser companies ensured extending its benefit to the farmers in the shape of Rs200 per bag price reduction.

Responding to a question, he dispelled an impression that Jahangir Khan Tareen was affecting his economic decision making and said there was not a single economic decision approved by the prime minister that was not based on his (finance minister’s) proposal and the prime minister had given him full powers and extended full backing.

In reply to another question about ‘own money’ on cars and yet relaxation on purchase of vehicles by non-filers of tax returns to facilitate the automobile industry, the finance minister said there was no justification for extra charges and the government would not let this to go on. “This is not acceptable at all,” he said, adding that car manufacturers would be called immediately to address the issue.

He said the government was addressing fiscal deficit, current account deficit and low reserves before creating an environment for savings, investment, industrialisation and economic growth on a sustainable basis and its performance should be tested on this count.

“This is just the beginning, we have a lot more work to do,” Mr Umar said, promising that the economy would see enduring stability on the completion of the PTI government’s tenure. He said the supplementary finance bill attempted to attract investment, support agriculture and promote small and medium size enterprises and the industrial sector.

Published in Dawn, January 25th, 2019