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Pakistan

Govt unaware of true extent of ongoing economic crisis: Miftah Ismail

  • Pakistan has always managed to avert issues and this is why the current plight is being treated 'like any other', says former finance minister
Published May 18, 2023

KARACHI: Former finance minister Miftah Ismail said on Thursday that the government is unaware of the true extent of the ongoing economic emergency because “Pakistan has been facing a crisis persistently”.

Speaking at an event titled ‘Pakistan’s Financial Crisis and a Way Forward- A Pre-Budget Discussion’ at the Salim Habib University in Karachi on Thursday, he said Pakistan has managed to escape and avert its economic issues in the past, and this is why the current situation is being treated “like any other”.

“Pakistan does not have enough revenue to pay interest on previous loans,” said Ismail at a gathering of academics, students, and members of the business community.

“It is taking new loans to cover the interest payments of old ones. When a country borrows to repay old interest, then that debt is unsustainable.”

Miftah for creating more provinces

Ismail, the finance minister to successfully negotiate the combined seventh and eighth reviews with the International Monetary Fund (IMF) before being unceremoniously removed to make way for Ishaq Dar, stated that the net tax revenue of Pakistan was insufficient to cover interest payments.

Ismail stressed that the IMF was not the root of Pakistan’s economic problems, but it was “rather the successive leaderships of the country”.

“Our problems are self-created. We have been unfair with Pakistan,” he said. “While inflation rose throughout the world, it surged at a steep pace in Pakistan.”

He pointed out that India and Bangladesh had a lower inflation reading than Pakistan. “All inflationary pressures cannot be connected to global rise in prices.”

According to him, Pakistan made errors in policy making.

“I blame myself too. Our leadership is the worst in the world.”

Ismail has been campaigning for a major overhaul in Pakistan for some time including the privatisation of loss-making state-owned entities, education sector revamp as well as population control.

His remarks come as Pakistan remains engaged in talks with the IMF over revival of its stalled bailout programme.

‘World Bank, IMF not responsible to run Pakistan’

The former finance minister stated that the World Bank and IMF were not responsible to run Pakistan and should not be blamed for the country’s economic ills.

Govt will have to save Pakistan from default for next two years: Miftah Ismail

“China has given us 4-5 bailouts while the UAE and Saudi Arabia have helped us from time to time. Pakistan has nothing to show for it,” he said.

“We go to the IMF because no nation wants to give loans to us and IMF demands structural reforms,” he said, expressing regret that the country violated the current IMF programme for a third time.

He was of the view that Pakistan will have to go to IMF for a 24th time as the country will default without it.

Miftah calls for economic ‘overhaul’

Currency devaluation

While accepting that Pakistan’s debt payments were piling up due to a depreciating rupee, Ismail held the view that currency’s slide was not a loss for the country.

“Our imports are $20 billion more than exports and remittances combined therefore, currency devaluation is used to put a stop on inward shipments,” he said. “If this is not done, then Pakistan would be buying for the current generation at the cost of future ones.”

Pakistan’s ex finance chief Miftah warns against any kind of debt restructuring

He underlined that importing at an overvalued currency would build pressure on future generations.

IT exports

When asked why Pakistan was lagging behind in IT exports, he noted that there was a problem with the education system.

“India made 5 institutes of technology within 10 years of its independence,” he said. “Pakistan’s education system cannot compete with India’s.”

Pakistan’s low quality of education is also an economic problem, he said. He also cited that spending on education was insufficient and the mechanism for spending was flawed as well.

Ishaq Dar has inflicted huge financial dent to Pakistan: Miftah Ismail

“The country is far behind in business process outsourcing (call centres) because no foreign investor wants to pour money in Pakistani market.

“The only foreign investment that comes to Pakistan is for local consumption and not for exports,” he said. “We are not an ideal destination for foreign investors.”

He also lamented that the business ecosystem of Pakistan took a dent on May 9 following the outbreak of protests and riots. This discouraged foreign investors who were in Pakistan at that time, he said.

He also regretted that the Dhaka Airport alone hosted more airlines than Karachi and Islamabad airports combined.

Talking about the ongoing political instability in Pakistan, Ismail said the Arab Spring was also one such crisis and people of the affected country expected that it would lead their nation to prosperity but this did not happen.

“Instead, the nations went from the frying pan into the fire,” the former finance minister emphasised.

He noted that “Pakistan’s leadership needed to be reformed” to bring a change in the country’s fortune.

Recommendations

He underlined the need to enhance competition between provinces to enable them to perform better. The former finance minister called for further devolution of federal institutions to provinces. He stated that the US followed this model and its states performed better economically.

The former minister advocated raising the minimum wage in the upcoming budget, stressing that “35% inflation makes it mandatory”.

He also called for a meeting of all political stakeholders of Pakistan to debate what policies to follow to drag the country out of economic quagmire.

Comments

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Love Your Country May 18, 2023 04:18pm
Self exposure at the expense of Pak.
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Notsurprised May 18, 2023 04:45pm
WHY PMLN did an own goal and removed Dr Miftah and replaced with the mess that is Dar. PMLN has paid the price for its stupidity, but far more cost paid by public. Could you not allow one competent decent person to do his job well. No. Anyways, still time. Bring him back!
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TimeToMovveOn May 18, 2023 05:11pm
One of the honest guys in Pakistan and from my school Wharton. He would have gotten the IMF deal. Dar came and destroyed what Miftha has put in place.
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Qasim Khwaja May 18, 2023 06:42pm
Great analysis. But, they will never let him come back.
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Tulukan Mairandi May 18, 2023 07:09pm
This Miftah is good at lip service
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Rizwan May 18, 2023 07:36pm
Oh here's our bearer of bad news again.
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Rizwan May 18, 2023 07:41pm
...and he repeats the same thing again and again like an overused dialogue in a film. . Okay, elite capture, high infant mortality rate, millions of children out of schools, malnutrition, underinvestment on human capital.. now what? Koi action bhi hoga ya nahi? Ya srif time pass "interesting" batain hain ye sub..So sick of talks and lectures.
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Parvez May 18, 2023 10:56pm
Rather late in the day to speak up.......and the government is clueless on most matters, the economy is just one because it's impact is strongly felt my 98 % of the people.
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Ash Chak May 19, 2023 12:31am
Pakistani external debt has more than doubled in the last 10 years. How did this happen? The answer is CPEC happened. CPEC would have been a boon and not a bane if it was done keeping Pakistani interests in mind. However, right from the outset, CPEC has been always about Chinese interests. Now , the results are there for all to see.
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KhanRA May 20, 2023 12:16pm
What makes Mr Ismail think the government cares? Their only goal is to hang into power to enrich their clan. We have a system of elected royalty (Bhuttos and Sharifs). They run this country for themselves, not us. They’ll share Islamic memes and duas, make sure minorities don’t get rights, and we will be satisfied that at least they have Iman in their hearts - even if we suffer.
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KhanRA May 20, 2023 12:18pm
@Ash Chak, this is a simplistic answer pushed by anti-China crew. CPEC didn’t account for more than maybe $30billion - and Pakistanis economy grew more than that in this time. The real drain is Army, state owned enterprises, circular debt from energy discos.
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