Finance Minister Miftah Ismail during his interview to CNBC clearly stated that there were serious worries about Pakistan heading Sri Lanka’s way and getting into a “default-like situation.” He gave credit to the significant changes brought by him and the current government. “Thankfully we’ve made some significant changes, we have brought in significant austerity blood belt tightening, and I think we have averted that situation,” he said.
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Finance minister gave a quick summary about the progress on the revival of International Monetary Fund (IMF) loan programme that Staff-level agreement has been reached. He was hopeful to get the board approval later this month.
Moreover, Mr. Miftah said that subsidies from fuel have been withdrawn, while taxes have been raised. He was satisfied with the situation and said, “I think we are headed in the right direction.” He added, due to increase in interest rates, imports have also gone down and now in the last week, our currency has come back about 7 percent against the US dollar.”
However, Mr. Miftah kept the adverse effects of withdrawing subsidies and increasing taxes behind the curtains. Massive increase in fuel and commodity prices have pressed the public as well as the business community. Various auto-assembling plants and textile mills have announced closures due to the prevailing problems. Large number of employees have been made redundant and fall in exports was witnessed. According to the Pakistan Bureau of Statistics (PBS), exports in July were recorded at $2.2 billion against $2.9 billion exports registered in June 2022.
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Moreover, we witnessed the immediate impact of the ‘super tax’ with the Pakistan Stock Exchange falling by 4.8% soon after the announcement came. Pakistan Business Council has already expressed that the current system in Pakistan is regressive, exploitative, and anti-growth. Our tax composition relies heavily on indirect taxes putting excess burden on the economy. In short, government is more inclined towards increasing taxes rather than widening the tax net.
Upon being inquired about the “pain” of all these measures on the people of Pakistan, Mr. Miftah Ismail blamed high international oil prices that had reached as high as 120 recently and 139 over the last year. He said, “given the high commodity prices, edible oil prices, this is just how the challenging environment is internationally. We do not have many reserves to absorb the shock.”
He admitted that they had to “pass out the pain” to the people.
However, he made a shift towards discussing the recent positive developments like decrease in imports. He emphasized that if Pakistan had gone to Sri Lankan way, this would have been even worse.
He referred to the government’s scheme of work as “conservative approach.”
He was hopeful that in couple of months as oil prices are decreasing, situation will get better.