The government has said that financing deal with China is a few days away with more positive things to unfold in next two to three weeks and "there is no panic of going to International Monetary Fund (IMF)." This was stated by Finance Minister Asad Umar, who was flanked by Advisor to Prime Minister on Commerce and Textile Abdul Razak Dawood, during a press briefing on economic reforms package on Thursday. Umar said that Pakistan is engaged with the IMF on regular basis and two sides have further bridged their differences on the bailout package.
The minister also claimed that Pakistan's position of credit default swap has improved in the international market and dismissed a question that Pakistan is borrowing from friendly countries at much higher rates as compared to those offered by International Finance Corporation (IFC), stating that interest rate was at 3 percent on money borrowed from the Saudi Arabia and the United Arab Emirates (UAE).
When asked the IFC was ready to provide loan to Pakistan at zero percent interest rate but the government was borrowing at 9 percent from the UAE and Saudi Arabia, the minister said that IFC does not provide loan at zero percent interest rate and Pakistan is borrowing from China at much lower rates. The minister said, "Neither are we going to take dictation from any one, nor will we bow down before anyone."
The finance minister said that discussion with China is on two aspects; one aspect is about financing and other aspect is of trade. "As far as financing is concerned, it is a few days away," said Umar, whereas Advisor to the Prime Minister on Commerce and Textile said that trade agreement with China has been completed and both sides are going into details as to how exports of textile, sugar and rice would be made. He added that a Pakistani delegation would be visiting China in a few days to finalise the details and quantum of exports.
Asad Umar said that total net negative revenue impact of the economic reforms package would be of Rs 6.8 billion and no new tax was imposed and only federal excise duty on 1800 cc vehicles was increased. The minister said domestic supply expansion is being focused to deal with the current account deficit and impact of the measures would be visible in the medium term.
The minister said that there is no amnesty on offshore assets in the Supplementary Finance Amendment Bill 2019 and only legal hitch in FBR law, which was stopping from pursuing against the assets, was removed. He said that AML, NAB, and FIA laws would be applicable on assets.
Minister of State for Revenue Hammad Azhar said that shortfall in revenue during the first six months was due to a reduction in sales tax on petroleum products and telecom sector; however, efforts would be made to recoup in the next five months.
The finance minister also asked the advisor to Prime Minister on industries to convene a meeting of auto industry to get information about complaints that dealers are charging premium on new cars. Earlier, the minister said that first phase to deal with the balance of payment challenge has been completed and the government has now moved into second phase to increase investment and revive industrial sector growth and agriculture sector.
The current account and budget deficits were at dangerous levels when the present government came to power and the immediate challenge ahead was how to deal with the problem. "The country was facing balance of payments crisis as this problem has repeatedly surfaced during the last three decades but this time it was the worst with $19 billion current account deficit that warranted immediate measures by the government and State Bank of Pakistan (SBP), Umar said."
He said though the measures taken to deal with the problems improved the situation, it was not sufficient and friendly countries provided unprecedented help to arrange external financing. The minister said that Pakistan has repeatedly been facing problems of balance of payments and deficits because of higher government expenditure and lower revenue and exports are far less than imports and are able to cover only 40 percent import bill as opposed to 70 percent in the past.
The minister said that 25 to 30 percent investment to GDP is required to put the country on higher growth rate to create employment opportunities and debt reduction. Along with dealing with the balance of payment challenge, the finance minister added, Economic Advisory Council (EAC) was constituted and its committees were formed to take their input as to how investment could be increased and growth in agriculture, industry and trade could be boosted.