KARACHI: Finance Minister Miftah Ismail has said the government wants to break a boom-and-bust cycle that’s played out for decades, and help the country to finally learn to live within its means.
Talking to Bloomberg News, he said import payments should equal dollar inflows, which means curbs on luxury items may remain in place for longer than currently anticipated.
“I want to see a Pakistan that lives within its means. That’s it,” he said. “Nothing can happen in one year, but we can start.”
The outlook has been further complicated in the aftermath of historic floods, which could have an economic impact of at least $10 billion, adding to a list of problems for the minister that includes political turmoil and raging inflation.
Less than a week ago the International Monetary Fund (IMF) gave Pakistan a $1.16 billion lifeline to avoid imminent default. The country also secured pledges for a total of $9bn in investments and loans from Qatar, Saudi Arabia, and the UAE. Mr Ismail said he expects a $1bn investment in listed state-owned companies to materialise in about a month.
Hopes for economic growth of more than 3.5 per cent
On Aug 29, Pakistan secured a bailout from the IMF to avert an imminent default as the country deals with political turmoil and deadly flooding.
The finance minister expects economic growth of more than 3.5 per cent for the fiscal year that started in July, down from an initial target of 5pc. He predicts that inflation, running at the highest in 47 years and the second highest in Asia, is close to its peak and will average 15pc for the year.
Vegetable prices, a key component, have already started to come down after shooting higher following the floods, he claimed.
The minister aims to spur Pakistan’s growth by avoiding unchecked imports of everything from home appliances to cosmetics and the resultant chronic shortage of dollars. The revival of the IMF bailout was the 13th for the country since the late 1980s.
Pakistan’s imports need to be equal to the dollar inflow from exports and from remittances provided by citizens living abroad, according to Mr Ismail. The State Bank figures show remittances in the second quarter running at record levels.
For now, Pakistan has restricted certain imports, including those for automobiles and automotive parts that’s seen Toyota Motor Corp. and Suzuki Motor Corp’s local units temporarily halt production. Mr Ismail planned the measures to last for an initial three months but the impact of the floods may see them extended.
Pakistan’s export revenue is dominated by textiles, and much of its cotton crop was washed away. The government will allow the textile industry to import as much cotton as it needs to keep the looms running. Islamabad is now also importing tomatoes and onions from Afghanistan, Iran and Turkey after shortages shot prices higher.
“If I have limited dollars, I will absolutely make sure that I use them to buy wheat, I use them to buy edible things for our people,” said Mr Ismail. “Maybe we can delay buying Audis and Mercedes.”
Published in Dawn, September 5th, 2022