Deputy Prime Minister and Foreign Minister Senator Mohammad Ishaq Dar. Photo: APP/ File
ISLAMABAD:
Deputy Prime Minister Ishaq Dar said on Wednesday that International Monetary Fund (IMF) programmes were generally anti-growth, adding that the focus of Prime Minister Shehbaz Sharif’s government from now onwards would be on increasing national output.
Dar’s speech at the Pakistan Policy Dialogue reflected growing pressure on the government to allow the economy to grow after a prolonged period of stabilisation, which has resulted in the highest unemployment and poverty levels in decades.
“After achieving stability, we will now move towards economic growth and will engage the IMF as well,” said the deputy prime minister and four-time former finance minister in his closing remarks at the event.
Dar said jobs could only be created through economic growth and that, from now until the end of his tenure, PM Sharif would focus solely on economic growth.
“The IMF programmes generally and usually are anti-growth,” Dar said twice during his half-hour-long speech at an event organised by the Policy Research and Advisory Council (PRAC) and Nutshell.
He said that in recent days discussions were held with the prime minister, during which the view was shared that any economic growth rate below 2.6% effectively amounted to negative growth, given the country’s annual population increase of 2.6%.
Finance Minister Muhammad Aurangzeb said that with a 2.6% population growth rate, the country could not grow sustainably and that Pakistan needed to bring this rate down.
However, Dar’s remarks also exposed divisions within the government over the future economic course. The conservative camp continues to argue against abandoning the stabilisation path, but there is a growing realisation within the civil-military leadership and academia that the country can no longer afford prolonged stabilisation.
“Sustainable growth is the right way forward,” said the finance minister while speaking before Dar at the same event.
High poverty levels, widespread unemployment, a punitive tax regime that increased the tax burden on the salaried class by 230%, a freeze in investment and capital flight are outcomes of stabilisation policies, said Younus Dagha, former finance secretary and chairman of PRAC.
Planning and Development Minister Ahsan Iqbal said Pakistan could immediately achieve 6% economic growth but warned that this could again trigger a balance-of-payments crisis within two years if economic fundamentals were not fixed.
Dar also said the government had no plan to immediately accelerate growth to 6%, noting that it could take two to three years to reach that level. “We are systematically addressing long-standing inefficiencies,” he said.
Dagha said interest rates were raised to record levels even though inflation had surged due to higher global commodity prices. He argued that inflation slowed due to a decline in global commodity prices, not because of high interest rates, while criticising what he termed the central bank’s flawed monetary policy that caused immense damage to the economy.
“Unfortunately, only one indicator tells the whole story, and that is the policy rate, which rose from a low of 5.25% in 2017 to 22%, increasing debt-servicing costs from under Rs2 trillion to Rs10 trillion,” said Dar.
Aurangzeb said interest expenses in the current fiscal year would be Rs850 billion lower than the annual budgeted amount.
Dar, who also holds the foreign minister’s portfolio, stressed the need to implement reforms, saying this would be the real measure of leadership success.
Commenting on Pakistan International Airlines (PIA) privatisation, Dar said his expectation was that bidding would reach Rs150 billion. The government sold a 75% stake in PIA for Rs135 billion, under which Rs10 billion would be received in cash while Rs125 billion would be invested in the airline.
As Chairman of the Cabinet Committee on Privatisation, Dar said the government would now move to privatise power distribution companies in the next phase.
He said conditions were shaping up and urged people not to lose hope, acknowledging that the external sector remained a challenge that would take time to fix.
The prime minister has already formed a committee under Dar to explore ways to raise exports to $60 billion within three years.
Dar said it should not be difficult for a country like Pakistan to increase exports by $10 billion, achieve $10 billion in additional services exports and raising remittances to $110 billion, adding $30 billion over four years.
Prime Minister’s Adviser on Privatisation Muhammad Ali said Pakistan needed to increase women’s participation in the economy, integrate the informal sector, shift from a trading to a manufacturing base and enable markets to achieve higher and sustainable growth.
Climate Change Minister Dr Musaddiq Malik, however, delivered a hard-hitting speech, saying Pakistan’s resources were captured by 50 individuals at the expense of the rest of the country.
