ISLAMABAD:
Finance Minister Muhammad Aurangzeb said on Saturday that the government was not overly concerned about the 29% additional tariffs imposed on its exports but said that a high-level delegation would soon visit Washington for trade negotiations.
“This is not something we are overly concerned about but we want to address this issue,” said the finance minister while addressing a news conference about the recent economic developments.
The minister did not give any details about the possible short-term adverse impact on Pakistan’s estimated $5.5 billion annual exports to the United States.
The statement came on the heels of Prime Minister Shehbaz Sharif’s decision to establish a policy Steering Committee and a technical Working Group to finalise policy response to unilateral US action and take advantage of an “early mover” nation.
The US is a very important strategic partner across the board and the largest trading partner, said the minister.
He said that in the next few days the government is going to finalise the recommendations and a high-level delegation will be sent to the US for trade negotiations. The government is constructively engaged and we want our view to get across the table, he added.
The government was finalising its recommendations along the lines of lowering duties on US goods and offering more opportunities to US sellers to minimise the current $3 billion trade surplus.
President Donald Trump slapped unilateral tariffs against 60 nations having trade surpluses, Pakistan standing at 33rd position with only a $3 billion surplus due to higher textile exports.
China debt
While responding to a question, the Finance Minister said that the discussions with China were currently focused on refinancing of the $1 billion commercial loan that Pakistan paid last month and issuance of Panda bond.
Islamabad returned $1 billion Chinese commercial debt on the assumption that Beijing would relend it. The commercial loan discussions are at a much advanced stage and the deal will be finalized soon, he added.
The minister had been asked to comment whether there was any progress on Pakistan’s requests for a $1.3 billion new loan and the rescheduling of the $3.4 billion guaranteed debt that was maturing during the IMF programme period. Both these issues are pending for sometimes and there has not been any tangible progress.
But the finance minister said that the discussions have remained productive. He also said that by the end of June, the country’s foreign exchange reserves will reach $13 billion, which are currently standing at six-month low of $10.7 billion after making Chinese debt repayment.
IMF visits
The Finance Minister said that Pakistan and the IMF have active engagements and there will be a few missions that will visit for discussions.
Pakistan has sought support from the IMF on improving governance and the IMF’s Corruption and Governance Diagnosis Mission is here, said the Finance Minister.
The Express Tribune has reported that the IMF sent a second Corruption and Governance Diagnostic Mission to Pakistan to hold in-depth engagements with over 30 departments and institutions, including the registrars of the Supreme Court of Pakistan (SCP) and the accountability court.
The IMF mission will meet with the registrar of the SCP to discuss judicial efficiency and accountability of judges. A separate meeting has also been scheduled with the registrar of the accountability court in Islamabad to discuss the operations of these special courts, they added.
To a question, the Finance Minister said that another IMF mission will visit Pakistan in May for the discussions on the next budget.
The Finance Minister also mentioned that for the first time, provinces had taken steps to meet targets, and he expressed hope that the IMF’s Executive Board would soon approve the second tranche of $1 billion.
Opening economy
The Finance Minister said that Pakistan’s industries will now have to compete and the economy will be opened. His comments came in the light of Pakistan-IMF understanding about lowering trade weighted average tariffs by 43% to 6% over a period of five years.
We cannot protect our industries without having a sun-set clause and every industry has to export, said the Finance Minister. He said that there should be exports in each sector, expressing satisfaction that the auto sector has started exports in the last two months.
The minister said there is a rise in foreign exchange reserves on the back of very strong remittances and expressed the confidence that the remittances will touch record $36 billion this fiscal year.
“Exports are also holding firm with 7% growth,” he added.
The minister said that the FBR revenue collection will increase by 32.5% this year, down from the budget target of 40% growth. But the Minister said that the overall target of increasing the tax-to-GDP ratio to 10.6% by the end of this fiscal year will be achieved. With 32.5% growth, the FBR’s target has been downward revised to Rs12.3 trillion a reduction of Rs640 billion by the IMF.
The Finance Minister stated that there has been a significant reduction in interest rates and, in his opinion, there is room for further reduction.
He added that there are no difficulties in opening Letters of Credit (LCs) or transferring profits by companies abroad. On the domestic front, inflation has significantly decreased. He said that the reduction in inflation rate should be passed on to the public.
The minister reported that Rs870 billion worth of purchases were made during Eidul Fitr, compared to Rs720 billion in the last year, showing 21% increase. This shows that people purchasing power has increased, he added.
