- Speaking at ceremony at PSX, finance minister says that while these measures would slow down growth, there is no 'immediate solution' to economic crisis
KARACHI: Finance Minister Miftah Ismail said that the government will continue to suppress imports for the next three months at the cost of slower economic growth, stressing that it did not have an immediate solution that would avert an economic crisis.
“We would not allow imports to increase for at least three months, which could impact growth, (but) we have no other choice,” said Miftah at the gong ceremony held at the Pakistan Stock Exchange (PSX) on Friday.
He added that car, mobile and appliance assembling units have little value addition and 95% of their cost of manufacturing is based on imports.
He said that the government would allow imports for these industries since they also generate employment but not at the moment.
“The first priority is to stabilise the economy,” he said.
Meanwhile, he added that there may be other reasons but as a trade economist, he sees direct economic fundamentals affecting the currency.
He said imports of $7.7 billion against $2.9 billion in exports in one month would certainly add pressure on the rupee.
He added that Pakistan witnessed a trade deficit of $48.7 billion in the previous fiscal year, and an ‘unsustainable’ current account deficit of nearly $18 billion.
“No country can sustain such current account deficits,” he stressed.
He said the government measures to reduce the import bill have led to rupee’s recent appreciation against the US dollar.
“The import bill was reduced from $7.7 billion to $4.9 billion, which solved the problem,” he said.
To a query, Miftah played down that banks were responsible for the recent hammering of the rupee, and said incoming dollars were low against outgoing dollars and under such circumstances, the currency was bound to depreciate.
“When dollar inflows are greater than outflows, the rupee would stabilise,” he said.
The statement comes at a time when the currency has witnessed a reversal in fortune and appreciated near the 223 level.
“We took hard decisions such as increasing the petroleum rates, which led to an increase in inflation, but we had no other choice to prevent a default,” he said.
The finance minister added that the country is in “a very comfortable position in terms of energy supply and energy security”.
To improve the country’s exports, a key step in attracting non-debt creating foreign exchange inflow, Miftah said that the government would soon launch an incentive scheme.
The minister also stressed on increasing tax collection, adding that the government was now targeting sectors and industries separately to rationalise taxes.
“For instance, we have rationalised the tax rate on gold from 17% to 3%,” he said.
On Thursday, the government also decided to reverse the decision of the fixed tax regime on electricity bills for a period of one year.
Subsequent to talks for the third consecutive day with traders, Miftah and Federal Minister for Power Khurram Dastgir Khan announced that on the demand of the traders, the government has decided to withdraw the fixed tax regime on electricity bills for one year.