KARACHI: Criticising the lopsided distribution of subsidised loans under the Temporary Economic Refinance Facility (TERF), Finance Minister Miftah Ismail said on Friday only one individual received as much as Rs90 billion through the concessionary refinance scheme.

He was referring to the facility provided by the State Bank of Pakistan, which allowed industrialists to seek long-term funding at minimal interest rates during the pandemic for setting up new units, introduced by the Imran Khan government.

“One Pakistani got Rs90bn out of Rs570bn disbursed under TERF. One Pakistani,” he said while addressing the student body at the Institute of Business Administration (IBA) where the Wharton-educated economist has taught as adjunct faculty in the past.

Mr Ismail railed against the perils of pursuing the import substitution model, which seeks to replace foreign imports with domestic production. “It doesn’t do any good,” he said while emphasising that the focus should be on the export promotion model, which allocates greater resources to the export-oriented sectors without creating price distortions in the economy.

Hints at quitting before 13-party govt completes its term

Giving a hypothetical example, Mr Ismail said the government is wont to fork out Rs2bn to an industrialist for setting up a factory against a promise that he’ll hire workers for Rs20,000 a month each. But setting up the factory increases imports, which widens the current account deficit. By the time the factory is up and running, the economy starts heating up. The government then decides to slow down economic growth to control the twin deficits. As a result, the industrialist sacks the same Rs20,000-a-month worker in whose name he’d received subsidised finance of Rs2bn in the first place.

Mr Ismail said Pakistani industrialists lacked imagination and produced goods for local consumption instead of foreign markets. Giving the example of a business group that sought help from his government in setting up a 500,000-tonne factory of polypropylene, a commonly used thermoplastic, the finance minister said it demanded a 20 per cent duty protection for 20 years as it knew it couldn’t compete against Chinese counterparts.

“Our industrialists, including my own family, never set up a factory to export,” he said, noting that manufacturers should focus on making basic goods like sewing machines that can help increase overall exports.

He said the floods have completely destroyed cotton and date palm crops in Sindh. The damage to crops have caused financial losses of Rs297.3bn, Rs3.6bn and 21.8bn in Sindh, Khyber Pakhtunkhwa and Balochistan, respectively.

Ismail, the politician

When IBA Executive Director Dr S Akbar Zaidi asked the finance minister why his economic planning sounded long term in nature even though the current government is supposed to go home in a year, Mr Ismail responded with a hint of resignation in his tone.

“The government has 13 months, but I may not even have that much,” he said.

At least three times during the talk, Mr Ismail referred to his imprisonment under the PTI government for alleged corruption in setting up an LNG import terminal.

“You should ask your leaders (from the PTI) why they incarcerated an innocent man,” he said after sensing — rather correctly — that a sizeable number of students in the auditorium were pro-Imran Khan. When the students laughed at his remark, he said dryly that spending five months in solitary confinement was no joke.

Published in Dawn, September 3rd, 2022