Pakistan will continue to survive, ministry rejects economist’s remarks

ISLAMABAD    -    The Ministry of Finance Sat­urday clarified that Pakistan would not default as there would be a major economic turnaround with political sta­bility likely to emerge soon.

A spokesman for the Ministry of Finance on Saturday said Pa­kistan's economy was moving firmly in the right direction to achieve stability and sustain­able growth under a rigorous reforms policy.

 “... the country is surviving eco­nomically and will continue to survive. . . what Pakistan has done is decisive and coura­geous: we will continue to walk the road to reforms to stabilize our economy and in the course of time to steer it toward the path of sustainable growth,” he said. Refuting the negative re­marks uttered by an economist Atif Mian about Pakistan’s eco­nomic policy and its compari­son with Ghana and Sri Lanka, the spokesman termed it a “mis­placed criticism made from a purely theoretical point of view.”

Responding to a tweet of the economist in which he criti­cised Pakistan’s economic poli­cy and suggested Pakistan take decisive actions, aggressive­ly restructure and take coura­geous actions; the spokesman said “This is a veiled suggestion to declare default.”

He said “The gentleman has no idea how practical econom­ics operates in practice. His comparison with Ghana and Sri Lanka, is also misplaced giv­en the incomparably small size of their economies and popula­tions relative to Pakistan.”

Fundamentally, the spokes­man said the economist did not care to analyse the structure of Pakistan’s debt which had less than a 10% share in com­mercial bonds/sukuks, with the next maturity falling due in April 2024.“The rest of the debt is owed to the multilateral and bilateral creditors. Both these classes of creditors are engaged with Pakistan and none has as­sessed that Pakistan should de­fault. The spokesman regretted that the author had completely ignored the deep-rooted reforms Pakistan had undertaken during the last nine months, including market exchange rate, and inter­est rate adjustments. mid-year taxation to improve fiscal posi­tion, imposition of levy on petro­leum products and non-moneti­zation of fiscal deficit.

“All these actions were under­taken under an IMF programme which was unprecedented as never in the country’s history such front-loaded conditional­ity was imposed. However, we accomplished it through heroic efforts.”

He said “It is unfortunate that despite such actions, the staff level agreement (SLA) has still not been reached delay­ing the release of the 90 review tranche. The country is surviv­ing economically and will con­tinue to survive.”

The spokesman said what Pa­kistan had done was “decisive and courageous: we would con­tinue to walk the road to re­forms to stabilize our econo­my and in the course of time to steer it toward the path of sus­tainable growth.” He said the comparison of the nominal ex­change rate was also unwar­ranted, adding “Pakistan’s real exchange rate is currently esti­mated to be 15% undervalued. The nominal rate is the result of speculation, market manip­ulation and general distraught from political instability.”

The spokesman explained the undervalued exchange rate was reflective of the fact that under­lying fundamentals were im­proving. “Pakistan has histori­cally sold petroleum products at significantly lower prices than regional countries. With the pe­troleum levy of Rs.50 achieved, this doesn’t involve any subsidy from the government.”

He said it would be unwise to levy additional tax on consum­ers on top of prices that had doubled in less than a year, es­pecially when they were facing rising inflation. “The author has cited this as an example of non­sensical policies,” the spokes­man said, declaring it “simply a misplaced example.”

He said Pakistan’s economy had suffered because of interna­tional shocks of COVID, the Rus­sia-Ukraine war and devastat­ing floods of last summer. “The challenges that resulted from an overly heated economy, be­queathed to us in April 2022, and the breach of IMF conditionali­ty on the eve of the departure of the PTI government, have been overcome by the present govern­ment.” The spokesman said the current account deficit; the pri­mary indicator of the balance of payments imbalance, had firmly been brought down from a high of $17.5 billion to around $3.2 billion. “This achievement is a reflection of bringing the econo­my to within its latent strengths and not on borrowed resources.”

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