Worst is over for Pakistan’s beleaguered economy: Umar

Insists current account deficit will come down to $12 billion in the current fiscal year from $18 billion in FY18

KARACHI: Finance Minister Asad Umar has said the worst is over for Pakistan’s beleaguered economy, which will turn around in the third year of the current government.

“I think year three (FY21) will be the break even point…and onwards you will see growth on the basis of which this will be the last IMF programme,” Umar said at the Pakistan Stock Exchange (PSX) on Saturday.



He estimated a 33% drop in the current account deficit to $12 billion in current fiscal year 2019 compared with a record high of $18 billion in FY18.

“We have taken monetary measures, have started taking fiscal measures. After doing all this, I think the financing gap (current account deficit) this year will be $12 billion,” he said.

“The (average) current account deficit dropped by half to $1 billion a month in August and September 2018 compared with $2 billion a month previously.”

The visit to the PSX came after weeks of volatile trading at the bourse. Stocks had taken a beating as the index plummeted to a 28-month low this week. “If the economy will grow, the market will grow,” he said.

Umar said the financing gap would further drop in FY20. “We are trying to overcome this $12-billion gap through a structural package, which will include one-time inflows (from the IMF)...we will 100% cover the $12-billion gap,” he reiterated.

The government has taken policy measures to fix the beleaguered economy. “You will see a healthy growth in exports this year. In the first quarter, exports are up, imports are down and remittances are 13% up,” he said.

“The worst is over for Pakistan’s economy,” he remarked, adding “it had evolved over the past three years and Pakistan was on the way to bankruptcy.”

Earlier, talking with PSX’s senior members and board of directors in a meeting, Umar was quoted as saying “the IMF loan agreement is likely to be signed before or immediately after the winter break.”

“If the IMF bailout programme gets delayed for one reason or the other, it will create no panic on the balance of payments front. We have arrangements for foreign payments for up to February 2019,” he was quoted as saying.

Ease of doing business

He assured the gathering of stockbrokers and traders that the government would work on improving Pakistan’s ranking in the ease of doing business to 99 from the current 147th place.

For this purpose, his government has set up the Council of Business Leaders. The council under the leadership of PM Adviser on Commerce Abdul Razak Dawood has been tasked to look into the matter and suggest measures.

Actions on the measures would be taken and implemented from the highest level of the authority in the country.

PSX taxation

The minister assured stockbrokers and traders of reviewing the high taxes on trading of shares and regulations in PSX.

He has agreed with PSX board in principle to allow investors to carry forward losses to be adjusted in the following years against 15% CGT (Capital Gains Tax) charged on shares sales.

CGT rules for both; PSX and real estate businesses should have uniformity.



“Valuation issues in real estate impact the whole economy. It needs to be fixed. It should be changed fundamentally. If the whole process of (real estate) price discovery and disclosure is fixed, it would automatically solve market (PSX) problem,” he said.

He also agreed to consider reducing presumptive tax, which at present stands at 0.02% on shares turnover and paid by stockbrokers.

Umar also agreed with stockbrokers to re-introduce group taxation regime to help building more conglomerates.

He also asked the Securities and Exchange Commission of Pakistan (SECP) to resolve all pending issues within two weeks including allowing increased trading on futures counter, facilitating buy back and treasury stocks.

Published in The Express Tribune, October 21^st, 2018.

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