Miftah Ismail. File
Pakistan’s new finance minister on Friday agreed with IMF recommendations to reduce fuel subsidies and end a business tax amnesty scheme, pledging to pursue structural reforms to boost a crisis-wracked economy.
The International Monetary Fund (IMF) in 2019 approved a $6 billion loan over three years for Pakistan but disbursement has been slowed by concerns about the pace of reforms.
Finance Minister Miftah Ismail, who took office this month after a previous government lost a no-confidence vote, said he had “good discussions” with the IMF on a visit during the Washington-based lender’s annual spring meetings.
“They’ve talked about removing the subsidy on fuel. I agree with them,” Ismail, himself a former IMF economist, said at the Atlantic Council.
“We can’t afford to do the subsidies that we’re doing. So we’re going to have to curtail this,” he said.
He said that former prime minister Imran Khan, seeking to avoid ouster, set a “trap” for his successors through heavy subsidies on fuel and electricity, as well as a tax amnesty scheme for businesses — measures that derailed a disbursement from the IMF loan.
“He gave an amnesty to businesses for setting up factories so that they don’t have to pay taxes, or even if they evaded taxes that’s ok,” Ismail told reporters at an event organised by Pakistan’s embassy.
But Ismail added that some targeted subsidies should remain for Pakistan’s poorest amid sky-high global prices.
The country’s new Prime Minister Shehbaz Sharif has vowed to jumpstart a moribund economy, certain to be a major issue in elections due next year.
Pakistan has repeatedly sought international support and suffers from a chronically weak tax base.
Ismail said that Pakistan, the world’s fifth most-populous nation, needed to move to a new economic model by removing obstacles and promoting exports to the world.
“We have such an elite-benefitting country that almost every subsidy that you can speak of actually goes to the richest people,” he said.
Ismail said his immediate goal was reining in double-digit inflation — a target complicated by lifting fuel subsidies — and kickstarting job creation.
He denied Pakistan was in danger of defaulting on its debts, with foreign reserves currently standing at $10 billion, and much of its bilateral debt held with friendly countries China, Saudi Arabia and the UAE.
Sharif has little over a year before he has to call a general election, leaving observers wondering whether ousting Khan will backfire, since his government inherited an economic crisis that will take time to overcome.
But Ismail said there was “never a wrong time to do the right thing.” “If what we claim is true, and we are actually more competent, then we should be able to make a difference in a few months. And if we don’t, we’ll be thrown out by the people, which is fine.”
Tea imports increase: Pakistan’s tea imports witnessed an increase of 11.95 per cent during the first three quarters of the current fiscal year as compared to the corresponding period of last year.
The tea imports during July-March (2021-22) were recorded at $487.092 million against the imports of $435.096 million during July-March (2020-21), according to data of Pakistan Bureau of Statistics (PBS).
In terms of quantity, the tea imports increased by 2.49 per cent during the period under review as these went up from 194,961 metric tons last year to 199,807 metric tons during the current fiscal year, the data revealed. The overall food imports increased by 15.46 per cent from $6,121,358 million last year to $7,067,740 million during the current fiscal year.
Meanwhile, on year-on-year basis, the tea imports increased by 13.36 per cent during the month of March 2022 as compared to the same month of last year.
The tea imports during March 2022 were recorded at $63.234 million against the imports of $55.782 million in February 2021.
On month-on-month basis, the tea imports however declined by 8.73 per cent in March 2022 as compared to the imports of $69.279 million in February 2022, the data revealed.
It is pertinent to mention here that the country’s overall merchandise imports during the first three quarters of the current fiscal year went up by 48.63 percent by growing from $39.489 billion last year to $58.691 billion in July-March (2021-22).