Asad Umar brushes aside critics, says painful measures will bear fruit

Updated April 08, 2019

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Finance Minister Asad Umar speaks at an event on Monday. Photo: DawnNews
Finance Minister Asad Umar speaks at an event on Monday. Photo: DawnNews

Finance Minister Asad Umar on Monday took a swipe at critics who accuse the government of having destabilised the economy with the weakening in the rupee-dollar exchange rate, saying the criticism was unfounded.

"The exchange rate is not a measure of a strong economy. At one point, the Pakistani rupee was stronger than the Japanese yen, even though the latter's per capita income was much higher than ours," he explained.

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He also expressed his frustration with television anchors who have been critical of his policies, suggesting that business reporters — "who have a much better understanding of the technicalities of the economy" — sit with anchors and share their knowledge on how to report on economic matters.

Returning to the rupee's rapid slide, Umar said that past governments had "ruined" the economy by artificially maintaining the exchange rate, and insisted that the practice had needed to end.

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"In order to end the practice [of artificially maintaining the exchange rate], economic fundamentals need to be strengthened," he explained. "By artificially maintaining the exchange rate, we harm our farmers and exporters and give a free subsidy to foreign traders."

He also regretted that "fake news reports are being circulated so that more investors park their money in foreign currency instead of stocks", leading to speculative pressure on the exchange rate.

The finance minister said that, instead of taking easy decisions influenced by "the news cycle or elections", the Pakistan Tehreek-i-Insaf (PTI) government wanted to devise policies that will strengthen the economy in the long term.

The PTI government, he said, inherited a "very sick patient" that had been taken out of the ICU [Intensive Care Unit]. The government, therefore had to take "emergency measures".

"The crisis is over. Now we are in the stabilisation process," he announced. Once the economy is stable, the country can move towards growth, he added.

Pakistan's economy is still hostage to a huge spending gap and fiscal and current account deficits, Umar said while stressing on the importance of overcoming these "fundamental issues". At this stage, the government is borrowing loans in order to pay the interest of old loans, Umar lamented, adding that the country's primary deficit is negative. He identified low revenue generation by the FBR as a key reason behind the economic difficulties being faced by the country. Drop in exports and low savings also hinder the country's economic growth, he said.

He laid strong emphasis on tax reforms, complaining that due to the low revenue generated by the Federal Board of Revenue (FBR) this fiscal year and in the past, the economy of the country had gradually slowed in its growth.

To improve revenue collection, Umar said that it was important to differentiate between policy and administration. Past governments had "compromised on economic growth by giving primacy to revenue [collection]", he added.

"Revenue will only increase when the economy develops," he said and announced that the government had decided to form a separate tax policy unit with experts on board. He also stressed on the importance of using technology to reform the tax collection system. For that purpose, FBR has secured the services of Pakistan Revenue Automation (PRAL) and a board with people with relevant expertise has been formed.

Laws have also been amended in order to bring the country's tax collection system at par with modern methods used around the world.

The finance minister once again highlighted the importance of regional trade, terming it one of the ways to "become a part of the world economy".

Umar also regretted that past governments had not developed the Islamic banking sector even though a significant portion of the Pakistani public preferred that over conventional banking.