Tarin hopes successful outcome of negotiations with IMF

ISLAMABAD: Federal Minister for Finance and Revenue Shaukat Tarin on Thursday expressed the hope for successful outcome of top level negotiations with the International Monetary Fund (IMF) for putting the $6 billion Extended Fund Facility (EFF) back on track.

“I believe that the progress we have made to-date is really encouraging and as we say, InshaAllah, I see this happening now in this visit,” the federal minister said in an interview at the United States Institute of Peace (USIP) on “Pakistan’s Economic Future”.

The minister said the concluding 6th round of talks with the IMF was the most important part of his visit to the United States (US), adding that many virtual meetings had already taken place, while the technical level discussions have also been concluded.

Finally, meetings would be held with seniors at the IMF, including its managing director, Tarin said.

The minister said his government thought that the IMF’s demand to increase the power tariffs would trigger inflation, adding that this point was made in technical discussion with the fund, which was also informed that the increase in tariff would be made in a gradual manner so that it does not have an abrupt impact on inflation.

There were some problems on the power side, including excessive capacity, for which the government had to pay, adding the performance of distribution and generation companies was also being improved.

The finance minister said all this was being successfully negotiated with the IMF.

Economy and growth rate

There was no stagnation in growth and the Pakistan economy would grow by over 5 per cent during the fiscal year 2021/22.

Back in the 60s, Pakistan’s economy was the fourth largest in Asia; however, the nationalisation policy of Zulfiqar Ali Bhutto and the Afghan war in 1979 disrupted the economic growth.

He said Prime Minister Imran Khan took over an economy, which was struggling in 2018 with a $20 billion current account deficit, unsustainable fiscal deficit, adding that he had to go for the tough IMF programme, besides taking some politically unpopular decisions, including currency devaluation, increasing discount rate and increasing utility prices.

The minister said as the country’s economy had started consolidating and growing, the Covid-19 pandemic hit the world. However, it was skillfully dealt with by the government as was indicated by far lesser human and property losses caused by the pandemic in Pakistan, compared with the rest of the world.

The government during the Covid-19 kept investing in two productive sectors, agriculture and industry, as well as housing, the minister said, adding that during the fiscal year 2021, the growth was recorded at over 4 per cent, compared with the negative half per cent growth the previous year, showing a V-shaped recovery.

Tarin said that the country had around 60 per cent of the population below the age of 30 years who needed jobs, so the government revitalised agriculture, industry, exports, housing and believed that the economy would grow by over 5 per cent. However, he said, at the same time, there was a need to make sure it is not overheated.

Bottom-up approach

The government was also ensuring that underprivileged were not ignored and made to wait for trickledown effect of positive economic growth, which has never reached to them for many decades. So the government utilised bottom-up approaches to ensure sustainable and inclusive growth, the finance minister said.

For this purpose, the government was providing interest-free loans to farmers and low-income families, besides issuing health cards and giving technical trainings to help around four million households.

Change in focus from geo-security to geo-economics

The minister said Prime Minister Imran Khan has changed the focus of the country from geo-security to geo-economics to ensure welfare of the people. This kind of change in focus means everything changes in terms of foreign policy, economic policy, internal security, and whatever else and relationship with the neghbours.

He said Pakistan was having good relations with all the neghbouring countries, but there were issues with India, which needed to be resolved.

Pak-India trade and Kashmir dispute

The minister said there was a fundamental issue between Pakistan and India and that was Kashmir, which, he said, was a disputed territory as per the United Nations Security Council resolutions.

However, he said, the current Indian government was not accepting its disputed nature and had taken some unilateral decisions, depriving the Kashmiris of various privileges given to them.

The trade and economic operations between India and Pakistan were suffering, he said, adding that Imran Khan had offered so many times to India that if they take one step forward, Pakistan would take two steps, urging the Indian government to respond positively.

At the political level, there was a need to provide some space for economics and welfare of the people of both the countries.

Afghanistan situation

Shaukat Tarin said that like all other countries of the world, Pakistan also wanted an inclusive government in Afghanistan and was also striving for that.

However, he cautioned that the Taliban were running out of cash and if the world did not come to support them on humanitarian grounds, there would be complete chaos, which would spill over to Pakistan and other countries.

Since the Taliban were saying that they would cooperate with the world, become a responsible country, take care of human rights, protect women rights and pledged not to promote terrorism, the world should help them step-by-step and encourage them to demonstrate improvements in their behaviour.

The finance minister said if the situation in Afghanistan worsens, it would affect Pakistan the most. “Pakistan believes if the situation in Afghanistan deteriorates we will directly get affected,” the minister said.

Talking about the security situation in Pakistan, the minister said Pakistan had fenced the border with Afghanistan, except a small strip near Chaman, while traffic flow to and from Afghanistan has been controlled and security forces were also taking necessary action to maintain security.

Reforms in human resource

The minister said the government was working to reform the entire human resource; bring in the private sector in key positions in ministries and have the combination of bureaucrats who understand both government and private sector.

He said the Federal Board of Revenue had constituted a committee on these lines having half-half representation from the public and private sectors to move forward efficiently.

Ease of doing business

The minister said that owing to the comprehensive policy decisions, Pakistan jumped 28 places in ease of doing business. He said that the prime minister was taking charge himself and the Board of Investment was reporting directly to him while the PM was holding two meetings every month.

He said that Special Economic Zones (SEZs) would be made autonomous to provide a conducive environment to the foreign investors, adding that autonomous status would initially be introduced in around 6 zones within next 12 months and would be replicated in other zones later.

Privatisation priorities

Shaukat Tarin said that there were around 85 companies run by the government, of which 15 were making losses of around one per cent of GDP. These include the national flag carrier, railways, steel mills and power distribution companies.

He said that these companies would be disassociated from ministries and their control would be handed over to professional people to overhaul them and within 5 years, these would be privatized. He maintained that in developing countries like Pakistan, the government had no job to run the businesses.

Offshore wealth

He said that people were being probed for flight of capital, adding that nobody would be spared and whoever had done anything wrong would have to face the consequences.

Pakistan-China-US relations

The minister said that Pakistan wanted to be friends with everybody, including the United States and China.

He said that Pakistan had a major strategic partnership with the US and its friendship with China would not affect its relations with the US. “We believe we can work with both powers equally.”

He said China had helped us to build infrastructure and that does not mean Pakistan had become China-Centric. “We are open and want to do business with China, the US, Europe, Japan, and Korea. We are an open country. There should be no misconception,” he cleared.

On China Pakistan Economic Corridor (CPEC), the minister said that Pakistan needed to build infrastructure to attract foreign investments. Since Pakistan was not in position to build such huge infrastructure, China provided funds and helped us in building roads, railways, power generation,  and other infrastructure, which generated economic activity.

To a question, the minister said that there were some projects where companies from China, United States and Pakistan were in engaged joint ventures and collaborating with each other. This cooperation could be enhanced, he added.

Gwadar Port

The minister again made it clear that the Gwadar Port was not China-centric, saying that it was open to everybody, including Japan, South Korea and Europe. He said if anybody wants to have business with African countries and Central Asian Republics, Gwadar was the right place.

The minister said that the government wanted to attract investment from different countries and that was why it had developed infrastructure.

He said Gwadar was a big opportunity as it was a unique territory covering Gulf, Central Asian republics and even distance to China is also short from this port.

Any country can come and invest and Pakistan has been making efforts to attract people from different countries to invest in economic zones and was also approaching overseas Pakistanis for this purpose.

However, he added, peace and stability in Afghanistan was needed, adding that stable Afghanistan was good for all, urging the world community to help make Afghanistan manageable for the benefit of all.

FATF’s grey list

Shaukat Tarin said that Pakistan had met 26 of the 27 Financial Action Task Force (FATF) conditions and the 27th one was also half met.

He said any other country meeting such conditions would have been removed from the grey list, however “Pakistan was being punished by some countries for different reasons, not economic reasons.”

“Frankly it is the same mantra that Pakistan is a terrorist state. Pakistan encourages terrorism,” he said adding that the country which lost 80,000 people and suffered $150 billion loses and has been suffering for 40 years is being blamed continuously.

Future of Pakistan

The minister said, no amount of hurdles would stop us from making Pakistan economically great again and one of the top countries in Asia first and then the world. “In our lifetime if we make Pakistan one of the top countries economically in Asia that will be an achievement that is my motivation,” he said.