Miftah sees pressure on rupee easing in next 2 weeks

Published July 31, 2022
Finance Minister Miftah Ismail addresses a press conference on Sunday. — PID
Finance Minister Miftah Ismail addresses a press conference on Sunday. — PID

Finance Minister Miftah Ismail on Sunday voiced optimism that the pressure on the rupee, which has seen a sharp drop against the dollar in recent weeks, would ease within the next two weeks.

"You are correct that after the August 17 [Punjab by-]polls, the dollar has got out of control and appreciated," he said while responding to a prompt from a reporter during a press conference in Islamabad.

"I truly believe — even though I don't speculate on the currency market — but I think that the true value of the rupee is far greater than this."

He stated that this month and the previous month, the government had to make payments worth billions which had caused the local currency to come under pressure.

However, he added that the pressure on the rupee would end by next month, promising to rein in the current account deficit.

The minister said that he would endeavour to ensure that the dollars coming into the country on a daily basis would be more than those leaving.

Ismail said that efforts to reduce imports would bear fruit and the value of the dollar would fall, adding that an improvement would be seen within the next two weeks.

"But let me be honest, no one knows the market. I can believe the fundamentals are in my favour but speculation, sentiments also play a role."

At one point, he also remarked that one remaining condition of the International Monetary Fund (IMF) would be fulfilled by tomorrow morning, without specifying which.

'Healthy economy'

At the outset of his press conference, the minister highlighted that the country witnessed an import reduction of $2.7 billion between June and July.

He said that for now the Economic Coordination Committee (ECC) had given approval to lift the ban on imports, but the prime minister and the cabinet had yet to give their approval.

"We are removing the ban on most items, except for vehicles, mobile phones and home appliances." He said that the ban on these three items would remain in place "for some time".

Ismail said that the coalition government believes it has saved the country from defaulting.

"We plan to give Pakistan a healthy economy. We are determined to minimise the current account deficit and turn it into surplus within a year or so."

The minister said that the government had succeeded in curbing imports and would make efforts to increase exports over the next two to three months.

"But the big issue of impending default has been resolved."

Ismail comes down hard on PTI

During the press conference, the minister came down hard on the former PTI government and held them responsible for the country's economic woes.

He said that the coalition government was not capable of bringing the country to the brink in a mere three months.

"The ones who brought the country to this point was the PTI and Imran Khan."

He said that in 2018, Pakistan's debt was approximately $25bn. "When we came into power, it had soared to $44.5bn. In four-and-a-half years, you increased our debt by $20bn," he said, holding the party responsible for "four consecutive budget deficits".

He blamed the policies of his predecessor, Shaukat Tarin, and the PTI chief for the burgeoning current account deficit.

"In four years, the PTI could not reach the tax-GDP ratio of the PML-N government. We had left it at 11.1pc and the PTI took it to 9pc. Khan sahab used to say he would increase tax [collection] but he reduced it every year."

When you are reducing tax collection every year and increasing your budget deficit, then you will be in debt, he pointed out.

He added that the previous government imposed indirect taxes which forced the coalition government to present a "difficult budget" by imposing direct taxes.

He also blamed the PTI government for the increase in circular debt, saying that it had gone from $1.1bn to $2.5bn during its tenure. The minister said that the PTI chief did not increase the power tariff for 1.5 years, which is why consumers were not receiving bills with fuel adjustment charges for April.

"They did not work on any area. Yes, they kept appearing on the media, on Twitter and making false statements [...]. They ask who is responsible? You are responsible Khan sahab."

He said that the PTI government had violated the agreement made with the International Monetary Fund (IMF) in November and had sold oil and petrol at a loss. He also noted how Imran gave amnesty to the real estate sector and his "ATMs".

"Afterwards, he said what harm can a little money laundering do? What harm can breaking the [IMF] agreement do? What difference does it make if the country defaults a little? It makes a difference Khan sahab."

Ismail went on to say that he went to the IMF office a day after assuming office as the government was prepared to take the necessary steps to save the country, even if it meant damaging their political capital.

The minister said that Imran should immediately submit a reply in the prohibited funding case. "What are your afraid of? [...] I urged the Election Commission of Pakistan to announce the verdict no matter what the Supreme Court does after."

Coming down hard on Imran, he said: "You talk about an imported government. But is an incompetent government which steals acceptable? Are we somehow less Pakistani than you? You should be ashamed of your statements."

Ismail's media talk came as Pakistan struggles to stave off an economic crisis as it awaits an IMF bailout.

Islamabad and the IMF reached a staff-level agreement earlier this month to pave the way for the release of a tranche of $1.17 billion — but the lender is awaiting approval from its board, which is not scheduled to meet until late August.

It also comes amid reports that the Army chief asked the US to help speed up the release with Pakistan faced with dwindling foreign exchange reserves and a free-falling currency.

High commodity prices have hit Pakistan hard. The current account deficit soared to over $17 billion in the last financial year compared to under $3 billion in the previous period. Reserves have dropped to dangerous levels, covering under two months of imports.

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