ISLAMABAD: Finance Minister Asad Umar on Wednesday addressed a live Question and Answer session on the state of the country’s economy.
The session, broadcast live across social media accounts of the ruling Pakistan Tehreek-i-Insaf (PTI), saw the finance minister answer the queries of an assortment of journalists.
Umar identified the primary reasons why the economy is in a bad shape but assured that there will be light at the end of the tunnel.
“There are two reasons why were are in this mess. We have a budget deficit, and secondly, our external deficit,” he said. “To resolve this you either need to increase exports or decrease imports. Our immediate action was to cut imports, which slows down the economy.
The minister likened the economy to a patient who is going under the knife in the operation theater. “The person is being operated on and it seems that he has been cut open but the fact it that he is being operated on to [rectify fundamental problems].”
When asked how the government would come good on its promise to create two millions jobs a year, Umar said: “They say that if the economy does not grow at a seven per cent rate, two million jobs won’t be created. As a rule of thumb that [reasoning] is fine, but it [job creation] also depends on what our priorities are.
“Tourism, SMEs, IT, and housing all are priorities, and all these sectors have the potential of job creation. Some investments create more jobs, some less. There will be growth from year three onward but it would be sustainable and long term.
“In September, I went to the PSX and I was asked the same question that when would growth be seen in the economy. I told them that we’d go through a stabilisation period of two years after six months of extreme turbulence. Then there will be growth. And now that we are out of survival zone, the purse strings will be loosened.”
The federal government recently raised the prices for petroleum products by up to 6.45 per cent. When the minister was reminded that during the PML-N government he had suggested that petrol prices should be set at Rs46, he contested the claim
“I had never said that petrol should be Rs46. I had said that tax should be lower than it was,” he said. “Tax ratio at the time was 52 per cent, right now it is 30 per cent. Had we kept the same taxes as before than we could have gathered Rs97bn more from Pakistani public. We have actually lowered the tax ratios.”
“Ogra (Oil and Gas Regulatory Authority) does petrol price’s calculations. On April 1, when the new prices were recommended, the only thing the government did was reduce the recommended price by Rs5,” he added.
A day earlier, Umar had announced that the government is planning to introduce another amnesty scheme to provide non-filers of tax returns an opportunity to whiten their undeclared assets at home and abroad. The finance minister today acknowledged that the idea of amnesty schemes is controversial but said it is the need of time due to the prevalent system.
“Tax amnesty is controversial, of that there is no doubt,” he said. “You can say that it is facilitation of tax evaders which would be a fair point. In my viewpoint, my previous objections are valid today as well. But after consultations, the majority’s view is that it should happen because in Pakistan the system had been such that we want to give people a chance to come into the tax net.
“However, if amnesty scheme does come, public officers and civil servants won’t be eligible, even though some journalists have pointed out that they have the most money.”
The finance minister again defended the government’s decision to not rush into an International Monetary Fund (IMF) programme.
“Is the economy in this state for the first time in Pakistan? We have two world records: one in trolling and the other in entering IMF programmes. I talked to IMF officials and told them that ‘I don’t want to burden my nation with more loans’. They told me that the situation we have inherited has never been inherited by anyone else.
“When you take a responsibility you also have to take a position. They used to say that IMF programme should be taken immediately so that markets don’t run away. After six months, our reserves are in a better shape. I did not rush into an IMF programme just to avoid criticism. Having said that, an agreement will be reached soon.”
Prime Minister Imran Khan recently indicated that Pakistan was on the verge of hitting a kind of jackpot in the form of discovering a huge reserve of oil and gas. The finance minister today gave an update on ExxonMobil-led consortium’s offshore drilling.
“There is deep offshore drilling being done 250km away from Pakistan. They have to drill 5,000m deep, of which, last I checked, they have so far drilled 3,500m. There was some delay due to rocky formation. When they reach 5,000m we will know what the find is. But we know that it’s potential is big. It’s a high-risk operation. ExxonMobil invests when potential find is massive. If oil is found, it will be a massive find.”
MoIn Febreuary, Umar had said that talks to bring PayPal to Pakistan were [underway][4]. When reminded of those plans today, Umar struck a less definitive tone, asking his team to follow up on those plans. “The IT ministry was given the task. They had to go in January. It hasn’t been done so far but we are trying. But AliPay is here,” he said.
When asked why the Federal Board of Revenue (FBR) has not done enough to raise awareness regarding tax benefits and incentives that come with entering the tax net, Umar asked Minister for Revenue Hammad Azhar to answer the query.
“It’s right that FBR’s optics are lacking,” Azhar said. “There is a lot of work to be done and there is an awareness deficit. We did do a concerted advertisement campaign, following which a 34 per cent increase was witnessed in on-time filing. But we should do a sustained campaign. We actually want to delve deep down and correct FBR’s fundamental problems. Once those are done, there will be a visible change and then we will [run more awareness campaigns].”
The rising inflation was brought to the finance minister’s notice, to which he said that the issue will be taken up in an upcoming meeting of the Economic Coordination Committee (ECC).
Umar was also reminded of the numbers reportedly quoted by his sibling and PML-N leader Mohammad Zubair regarding the government’s economic performance. Umar contested the veracity of the numbers quoted as he maintained that the incumbent government’s performance is better than the former administrations’.
“According to Zubair Umar, the SBP numbers are bad,” he said. “I have told him many times to have any opinion he wants but ‘please take numbers from me’. In PML-N’s first year there was double-digit inflation which has not been seen so far here.
“When one attempts to move out of a balance of payment crisis, inflation rises. Ours has increased but increased lower than theirs. Moreover, in their government, the inflation was borne mostly by the lowest class. This time, the opposite has happened; the rich have suffered.
“As far as unemployment is concerned, even Hafeez Pasha has said this much that under the PPP, unemployment had increased and under PML-N it increased even more sharply. If you observe the textile industry, the people who had exited the industry are actually coming back.”
