Rupee devaluation multiplied debt servicing: Miftah

Finance Minister Miftah Ismail stated on Saturday that sharp rupee devaluation, done by Pakistan Tehreek-e-Insaf (PTI) government in 2019, multiplied debt servicing of Pakistan.

In a bid to secure the $6 billion International Monetary Fund programme in 2019, the then government devalued rupee by a large proportion and adopted a free floating exchange rate. Resultantly, the local currency breached Rs150 per dollar mark.

In a press conference, Miftah stated that devaluation of local currency inflated debt servicing from Rs1.499 trillion in 2017-18 to Rs4 trillion at present.

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“With such a high debt servicing, any nation would move towards a default situation,” he said. “To fund the deficit in such a situation, the government is forced to take foreign loans which raised the current account deficit.”

He explained that fuel subsidy, announced by former prime minister Imran Khan in February 2022, was not the only factor that brought Pakistan at the brink of default.

“It happened because of 4 years of flawed economic policies,” he cited, adding that fuel subsidy enhanced the leakages of revenue.

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He highlighted that Pakistan recorded Rs3.5 trillion per year deficit during the first three years of PTI government. “Moreover, the deficit swelled to Rs5.1 trillion in fiscal year 2021-22.”

He stated that Pakistan recorded four historically huge budget deficits during the tenure of the previous government.

He highlighted that tax collection dropped on nominal terms in the first year of PTI government and throughout its tenure, the tax-to-GDP ratio could not surpass the level recorded by the Pakistan Muslim League-Nawaz government in 2017-18.

“We initiated new power projects from 2013 to 2018 but now, the power infrastructure is in a deteriorated state,” he said.

He promised that the present government would surpass the tax collection target set for fiscal year 2022-23. To enhance revenue, he stated that the government would reduce power subsidy.

Agriculture and export sectors are being prioritised, he said. He stated that Prime Minister Shehbaz Sharif was reluctant to increase the price of petroleum products after he assumed office however, “it was done to save the nation from default.”