Dar admits Pakistan in 'tight spot' but 'no chance of default'

Federal Minister for Finance and Revenue Ishaq Dar on Wednesday reiterated that “there is no chance that Pakistan will default”, but admitted the country’s economy remained in a “tight spot”.

“Conditions are tight, but Pakistan will move forward. Pakistan will not default,” said Dar as he addressed via video link the gong ceremony for the first listing of a developmental REIT (Globe Residency REIT) at the Pakistan Stock Exchange (PSX) in Karachi.

“I admit that we do not enjoy the same level of foreign exchange reserves ($24 billion) we left back in 2016. But that is not the government’s fault, the fault is in the system and we must ensure that every stakeholder takes part in carrying the country forward,” he said.

Dar stressed on the country’s business leaders to participate in curbing the ongoing “negative propaganda” pertaining to Pakistan’s economy.

The finance minister said the propaganda has created fear among the masses, resulting in volatility in the currency and the gold markets. “We have serious issues, but that does not mean we cannot come out of this mess,” he said.

He said that the government remains steadfast in improving the economic conditions of the country. “I am thankful that Pakistan’s business community stands with the government,” he said.

Dar said Pakistan was projected to become the 18th largest economy in the world by 2030, according to PricewaterhouseCoopers. “However, at present, we are scrambling for funds.

“I think we need to introspect and should not repeat those adventures and experiments that have led to the current predicament,” he said.

On the external account, Dar said that “by the close of this fiscal year, we will be in a much better position in terms of external account and foreign exchange reserves, as well”.

Regarding the ongoing volatility in the currency market, Dar reiterated US dollars are being smuggled to a neighbouring country. “We are importing wheat, which is also being smuggled. Similar is the case with fertiliser, which is being heavily subsidised and also being smuggled.

“Smuggling has to be stopped and departments are working to address the issue. This has led to the difference in rates being offered at the open and grey markets.”

On the International Monetary Fund (IMF), Dar said that regardless of the “very difficult conditions” accepted by the previous government, the present government remains committed to completing the programme.

“We have completed the IMF commitments as well, pertaining to Petroleum Development Levy (PDL) made by the previous government,” he said. “We also have to think about 80% of the people who cannot afford fuel prices going up every now and then.”

He said that the government has managed to narrow the trade deficit, which has reduced the current account gap as well. “We are slowly moving forward. But we don’t have a magic wand,” he said.

During his address, the finance minister congratulated Arif Habib Dolmen REIT Management Limited (REIT Manager) and Javedan Corporation Limited (offeror) over the successful listing that was oversubscribed by 300%.

Dar said that Pakistan offers immense potential in REITs.

“India entered the REIT market after Pakistan. However, Pakistan’s capitalisation of REIT is $134 million while India’s REIT market now stands at $8 billion,” he said.

The federal minister said that during the tenure of the Pakistan Tehreek-e- Insaf (PTI) government, not much attention was paid to the Securities and Exchange Commission of Pakistan (SECP).

“It was unfortunate that for over 1.5 years the SECP, which is a regulator of Pakistan’s corporate sector and the stock exchange, was a quasi-dysfunctional organisation, working only with two commissioners out of five. Thus, the first thing I did was to appoint persons on these key positions, after a transparent process,” he said.

Dar’s remarks come at a time when questions have been raised on Pakistan’s ability to meet its growing debt obligations. The alarm bells have especially been louder over falling foreign exchange reserves. Last week, reserves held by the State Bank of Pakistan (SBP) fell another $584 million to a critical level of $6.12 billion.

The same day, global ratings agency S&P Global cut Pakistan’s long-term sovereign credit rating by one notch to “CCC+” from “B” to reflect a continued weakening of the country’s external, fiscal and economic metrics.

However, the finance minister as well as the SBP Governor, Jameel Ahmad, have looked to pacify concerns, saying that the country was set to see foreign exchange inflow in the second half of the fiscal year (January onwards).