Defiant Dar refuses to step down
Finance Minister Ishaq Dar on Friday put on a brave face and ruled out his resignation, terming the International Monetary Fund’s (IMF) assessment that non-Chinese foreign commercial banks might not give any loan to Pakistan in this fiscal year “irrational”.
Dar held a news conference the day the capital was abuzz with rumours that there was pressure on the government to replace him as the finance minister.
He also, for the first time, distanced himself from the exchange rate and interest rate policies, saying that these areas were now the responsibility of the central bank after amendments made by former premier Imran Khan to the State Bank of Pakistan (SBP) Act.
“Why should I resign?” asked Dar, criticising former Federal Board of Revenue (FBR) chairman Shabbar Zaidi.
He described Zaidi as a person who was doing “third-rated” politics and a “non-entity”.
Zaidi, in a recent public appearance, had claimed that Dar might resign soon.
The finance minister maintained that Zaidi should be put behind bars for giving out-of-turn tax refunds to his client companies when he was the FBR chairman.
The news conference also affirmed that the differences remained between Pakistan and the IMF on the interpretation of the external financing gap -- a sum that Islamabad needed to avoid default and make its repayments.
“The IMF has assessed the financing gap at $7 billion but our numbers are $5 billion,” Dar claimed.
“We are talking about principled numbers that will be written in the MEFP (Memorandum for Economic and Financial Policies),” the minister continued.
“We have valid reasons [to believe] that the gap is not $7 billion but $5 billion,” he added.
Dar argued that with a $3.8 billion current account deficit during the first seven months of the current fiscal year -- that might widen to $4.2 billion during eight months -- the $8.2 billion deficit projection by the IMF was incorrect.
“The eight-month current account deficit figure will be released in eight to 10 days and that will clearly show [where it stands],” the minister said.
“However, I am told that the deficit will be in the range of $400 million to $450 million,” he added.
Pakistan and the IMF have a difference of opinion on the external loan projections as the global lender thinks that Islamabad would not be able to receive $1 billion to $1.5 billion commercial loan from the Gulf and European banks.
“It is irrational to think that out of the $3 billion to $3.5 billion commercial loans that Pakistan repaid to non-Chinese commercial banks, no money will be refinanced,” Dar said.
“The Chinese are 100% refinancing their $2 billion loans,” he added.
He said apart from that, Pakistan had met the conditions set by the World Bank for the second Resilient Institutions for Sustainable Economy (RISE-II) programme that would unlock a loan of $950 million.
The minister did not give any firm timeline for reaching a staff-level agreement with the IMF but said that all the prior actions, including the imposition of the debt servicing surcharge on electricity bills, had been completed by Pakistan.
Dar maintained that filling the $7 billion financing gap was not among the prior actions set by the IMF.
“They [IMF] say that they will help and work with us to cover the gap,” the minister said. However, he added that the financing gap was one of the two outstanding issues in reaching a staff-level agreement.
Dar ruled out the chances of the country defaulting on its external repayments.
“We have never defaulted, and we will not. We were in a precarious situation and are currently going through it,” he added.
The minister said Pakistan was expecting $1.3 billion in financing from the Industrial and Commercial Bank of China Ltd (ICBC) in the coming days to help shore up its foreign exchange reserves that had already increased to $3.8 billion.
“All our formalities with the ICBC are complete as of last night. We returned them $1.3 billion in the last few months and they are giving it back. [They] have renewed this facility,” Dar elaborated.
The minister said China would give $500 million to Pakistan in the next three days and another $500 million 10 days after the first loan, adding that all the documentation for this process had been completed.
Dar, for the first time, officially revealed that an intelligence agency told him that every year, security vans transferred $2 billion to Peshawar from the south.
“Obviously, this money is being smuggled across. So we are discussing how to stop this,” he said.
However, the government had not taken any action to stop this despite knowing the exact quantum of transfers and the routes, including the details of the security vans.
Dar backed the central bank’s decision to issue a priority list to domestic banks for sanctioning dollars for imports -- the instructions that the IMF had already asked the SBP to withdraw.
“The State Bank has kept the letter of credits [LCs] for non-essential items on the lowest priority, and that’s the right thing to do,” the minister said.
The minister claimed that the incumbent government had made a “principled decision” whether to save the country or its own politics around the time of last year’s vote of no confidence against Imran.
Dar said the state’s interest was prioritised over political interests at the time, adding that it was the “right decision”.
The minister criticised Imran, who he claimed had been trying to sabotage the IMF programme since he was ousted from power in April 2022.
Dar maintained that the PTI chief’s attitude was “selfish”, adding that opposition parties around the world worked together with the government on national issues.
The minister maintained that Imran’s attitude had a negative impact on the financial markets.
He added that “mismanagement and bad governance” were the reasons for Pakistan’s current predicament.
The finance minister then went on to discuss the key economic indicators during the PTI’s government and where it left them.
He also claimed that global inflationary pressure was a major reason for rising inflation in the country.
However, his stance did not reflect the ground realities as the current wave of inflation was caused by the government’s administrative decisions in an effort to revive the derailed IMF programme.
Dar maintained that the government had a “roadmap” and policies for taking the country out of the current “quagmire” but they could not be made public.
However, the minister said he was confident that by June 30, the SBP’s official reserves would increase to $10 billion.