Caretaker Federal Minister for Finance, Revenue and Economic Affairs, Dr Shamshad Akhtar said that the economy has stabilised due to proactive measures taken by the interim setup.
Addressing a press conference on Saturday, Dr Shamshad highlighted the 6-month economic performance of the caretaker government. “A very strong commitment to transform this economy was the leadership’s message to us,” she said.
Dr Shamshad said the interim setup inherited the issue related to the exchange rate.
“The (USD-PKR parity) had almost hit 320, and that was quite a shock to the economy,” she said.
“We were obligated to make sure that we don’t intervene in the market, but all the investigation pointed to the huge amount of currency smuggling, alongside and cross border, which was destabilising our currency,” she said.
Therefore, joint action was launched and due to these measures the exchange rate was brought down to around 279 in the inter-bank market, she said.
“We have narrowed the spread between the open market and the official rate, this has resulted in stabilisation. It has helped not only in restoring the confidence but has brought down the cost of doing business in the last few months,” she said.
Dr Shamshad highlighted that the trade deficit has reduced to $1.9 billion in January 2024, as compared to $2.6 billion in the same period the previous year. “Similarly, the exports have grown by 27% to $2.8 billion in January,” she said.
The caretaker minister said several measures have been taken, which would help enhance the country’s export potential and market.
“There have been reforms in virtually every segment of the economy,” she said.
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Dr Shamshad termed the successful delivery of the International Monetary Fund (IMF) Stand-By Arrangement (SBA) as the biggest achievement during her stint, which helped the government secure a $700 million tranche in January 2024.
“We were hoping that the tranche would come earlier, but due to IMF processes the tranche was delayed. Therefore, we approached the World Bank, the Asian Development Bank (ADB), and AIIB to fast-track their quick dispersing assistants.
“Fortunately, we got $1.5-1.6 billion from these multilaterals by December, delinking this funding from the IMF programme, which has never happened in Pakistan’s history,’ she said.
The caretaker finance minister said the government successfully managed to curtail the fiscal deficit at 1.3% of the GDP from July to November 2024, despite the presence of a significant rise in markup expenditure.
“The high interest rates help in macroeconomic management, but it also significantly increase the government’s domestic debt. Not only it is impacting the local businesses but it has also impacted the debt situation of Pakistan,” she said.
“At present, we are borrowing basically to pay off our liabilities. I can assure you that incremental growth in real debt is limited,” the minister shared.
On the external front, Pakistan’s current account deficit during July-December FY2024 has reduced by 71.1% to $831 million, against a deficit of $3.6 billion during the same period last year, she shared.
“This improvement is attributed to the 35.2% decline in trade deficit.”
She said that the newly launched Export-Import Bank i.e. EXIM Bank will be responsible for export finance operations. “From the central bank, there has been a transfer of these obligations to EXIM Bank in a phased manner,” she said.
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Citing her professional experience, she said that subsidies given to industries lead to distortion and waste of resources.
“If I had the choice, we would privatise everywhere, thus the government can utilise its funds for education, health and development projects, which would lead to the country’s progress,” she said.
“We have to make sure that the corporate governance in the State-Owned Enterprises (SOE) should be of high quality,” she said.
She said that the investor should raise liquidity from the Pakistan Stock Exchange (PSX) instead of approaching banking channels. “This would compel banks to bring down their rates, as demand pressure would subside,” said Dr Shamshad.
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