- Caretaker finance minister says exchange rate not being manipulated
Caretaker Finance Minister Shamshad Akhtar on Friday said reforms by the government targeting Exchange Companies (ECs), and actions against currency smugglers do not “contradict conditions of the International Monetary Fund (IMF)”.
“Both these actions have nothing to do with the IMF, as we are not manipulating the exchange rate,” she said while addressing media alongside Caretaker Minister for Power Muhammad Ali.
“These actions do not contradict with the IMF conditions, I am sure that they (IMF) would appreciate us,” said Dr Shamshad. “Intervention is a problem, but fixing our (currency) regime is not a problem.”
Dr Shamshad said currency reforms taken by the government aim to improve efficiency.
“After analysis, we found there is a need to consolidate and strengthen the ECs,” she said. “Through SBP reforms, we are tightening regulatory controls of ECs and we are also encouraging consolidation.
“Moreover, the crackdown initiated by law enforcement agencies (LEAs) against currency smugglers has salvaged our currency.”
Dr Shamshad said reforms introduced by the government targeting the ECs, and anti-smuggling efforts have stabilised the Pakistani rupee.
“This stability has come without any intervention. This is a very positive development.”
She said that the caretaker government faced many challenges, “but we have adopted a prudent strategy to control our expenditures and enhance our revenues”.
“There are some signs of economic recovery even if it is just starting,” said Dr Shamshad.
She added that the CPI-based inflation has declined from 38% in May to 27.4% in August. “This is an important indicator, and we hope the price stability will improve as we move forward,” she said.
“We anticipate good results in the agriculture sector, whether it is related to major or minor crops. Our growth prospects would bolster amid improved results in the agri-sector.
On the monetary front, Dr Shamshad said the SBP’s decision to keep the policy rate unchanged at 22% would bode good results. “The cost of borrowing for the industries would reduce.”
The minister shared that the government remained in talks with international donors. “We are hopeful that besides the normal flows, funds for some sectors would be fast-tracked.”
“We have talks with the World Bank. We are seeking that its cumulative assistance in Pakistan reaches $2 billion,” she said. “We are also striving to fast-track the funds of Asian Development Bank’s (ADB) RISE programme.”
Dr Shamshad shared that a number of projects are on the table to improve Foreign Direct Investment (FDI).
“Our foreign exchange reserves remain stable,” she added.
She informed that the government has released Rs20 billion to banks, in a bid to enhance remittance inflows through formal channels. “This is a major initiative. We are also operationalising the EXIM Bank,” she added.
Meanwhile, Caretaker Minister for Energy, Power & Petroleum Muhammad Ali said the ongoing crackdown against power theft is bearing fruit, as recoveries have increased.
“The crackdown would continue with full momentum in the coming days,” he said.
Ali said that the government intends to improve the management of DISCOs, which will lead to long-term and sustainable improvement.
The Minister for Energy shared that the power sector sustains losses to the tune of Rs2,500 billion, on which the government makes interest payments, which adds to the debt burden. “Whereas, losses in the gas sector have reached Rs2,900 billion,” he added.
Ali shared that the extraction of oil and gas in Pakistan has been in decline for the past 10 years. “Today we are extracting oil and gas worth $3.5 billion lower than what we used to back in 2013,” he said.
“In the past, we didn’t extract our own reserves, which was a major blunder,” said Ali.
“In collaboration with Sui Southern, we have identified fields from which hydrocarbon can be extracted in a span of 3-6 months. We will be finalising rates in the coming days.”
The minister said that the government intends to utilise indigenous sources to reduce the country’s reliance on imported fuel.
Responding to a query, Caretaker Finance Minister Dr Shamshad admitted that the government is facing a shortfall in customs duty, however, the Federal Board of Revenue (FBR) revenues have exceeded monthly targets.
“Our industry is highly import-intensive,” she said. “Oil is absorbing the bulk of our import bill and because the global commodity prices are on a higher side, this has created a lot of pressure on us,” she said.
“Our main issue is structural when it comes to revenue. We have not enlarged our tax base, while the enhancement of tax net remains limited,” she said. “We are hopeful to meet revenue targets reached with the IMF.
“What we require is firstly substantive legal amendments to broaden our tax base. Secondly, we need to strengthen the FBR. Over 60% of the economy is informal thus documentation is essential,” she said.
Responding to a query, Dr Shamshad stated: “It is not in my knowledge that there is any discrimination against the Sindh government over allocation of resources.
“Being in an IMF programme, we need to achieve a primary surplus. However, the calculations given in the budget for FY23-24 are very weak, as a number of expansionary projects have been introduced.
“We are reviewing the public sector programme, both on federal and provincial side. After completing the internal review, we will conduct a meeting with the provinces,” she said.