PML-N govt to honour IMF commitments: Miftah

Would-be finance minister doesn’t rule out increase in prices of petroleum products

ISLAMABAD:

Pakistan needed the International Monetary Fund's hand holding to come out of the economic crisis, as it faces a grave challenge of financing a record budget deficit of Rs6.4 trillion and a $20 billion current account deficit this fiscal year, said Dr Miftah Ismail on Tuesday.

Miftah, who is likely to be notified as the finance minister at least until Senator Ishaq Dar returns to the country, said the new government would honour all international commitments made by the previous PTI government, including the IMF programme, as the country at the moment did not have any other option.

Miftah, while addressing a news conference along with other party leaders, added that the country needed the IMF’s support as it faced a grave challenge of financing a record budget deficit of Rs6.4 trillion and a $20 billion current account deficit this fiscal year.

He also said the fate of the State Bank of Pakistan (SBP) governor would be decided by Prime Minister Shehbaz Sharif and did not rule out an increase in the prices of the petroleum products.

“Talks with the IMF will be held on a give-and-take basis, as there are serious consequences of abandoning the global lender’s programme on the country’s exchange rate, foreign loan repayments and bonds being traded at the secondary capital markets.”

The PML-N leader further said according to the figures provided by the finance ministry, at the current pace of expenditures the budget deficit would be around Rs6.4 trillion or 10% of the GDP by end of this fiscal year.

“It will be the highest budget deficit ever recorded in absolute terms as well as in terms of the GDP.”
Miftah disclosed that deficit was nearly Rs1.5 trillion more than the target set in the budget, adding that former finance minister Shaukat Tarin was aware of this but he had never told the truth to the nation.

He criticised the previous PTI government for laying “landmines”, which had now forced the new government to stay in the IMF programme.

However, Miftah added that the government would try to make gradual adjustments while keeping in mind inflation and the people's social wellbeing.

“Excluding pending liabilities, the finance ministry has told us that the federal budget deficit will be at a record high level of Rs5.6 trillion at the end of the ongoing fiscal year.”

Of this sum, Rs800 billion liabilities include Rs220 billion of the Sui Northern Gas Pipelines Limited (SNGPL) while another Rs80 billion that needs to be disbursed to the power generation companies to keep them afloat.

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Miftah said only the primary budget deficit -- being calculated after excluding the interest payments – was estimated at Rs1.65 trillion in this fiscal year –up from the earlier revised estimates of Rs900 billion. “Expenditures, which had been projected at Rs8.7 trillion, are now estimated at Rs9.5 trillion.”

The PML-N leader said the new government would restart the IMF programme, as it remained the only option for Pakistan to deal with the current economic crisis.

Terming the Rs373-billion relief package announced by former premier Imran Khan as a “landmine left for the newly formed government of incumbent Prime Minister Shehbaz Sharif, Miftah said the PTI officials wrongly said that the package could be financed by the government. “The IMF had not agreed on that package.”

The would-be finance minister also blamed the members of the Economic Advisory Council for supporting such an irrational package, which was unsustainable.

To a question whether the new government would increase prices to reduce the budgetary losses, Miftah said the decision would be made after receiving a summary from the Oil and Gas Regulatory Authority on April 14 (Thursday).

Miftah -- a former IMF official -- said this year the current account deficit could hit $20 billion -- the highest figure in the country’s history.

“The government needs $9 billion to bridge the current account deficit in the remainder period and make foreign loan repayments.”

He added that the $3 billion Saudi Arabian short-term deposit was also contingent upon the IMF programme and the new government also could not borrow from the international capital markets in these circumstances.

However, Miftah said could not go to Washington to attend IMF Spring meetings as his name was on the Exit Control List (ECL).

The PML-N leader added that the country’s trade deficit was expected to hit $45 billion this fiscal year, which was a record.

“Pakistan imports are going to hit a record $75 billion, whereas the country’s exports will reach $30 billion.”

Miftah said because of the rising current account deficit, foreign exchange reserves were declining.

“Last month alone, foreign exchange reserves declined by $5 billion, which is the largest single decrease in foreign exchange reserves in the history of Pakistan.”

He added that the new government's top priority was to stabilise and increase the foreign exchange reserves, and this will require support from the IMF.

The PML-N leader said in the coming fiscal year, the country needed to make payments of $30 billion, for which it was important to take the IMF on board.

Praising the announcements made by PM Shehbaz, Miftah earlier said the new government had increased pensions by 10% immediately, and also raised the minimum wage to Rs25,000.

He added that the additional impact of the increase in pensions was Rs13 billion for the remaining period of this fiscal year.

Miftah said markets reacted positively to Shehbaz’s ascent to the PM House, as the Pakistan Stock Exchange posted massive gains, whereas the dollar, which was trading at 190 just days ago, had gone down to 182 against the rupee.

Speaking on the occasion, Dr Senator Musadiq Malik said the rupee’s value, which almost four years ago was Re1, had now gone down to just 56 paisas because of double-digit inflation – eroding people's purchasing power.

Miftah also said he would support the privatisation of the Pakistan Steel Mills, Pakistan International Airlines and power distribution companies while also ensuring protection of jobs of the existing employees.