ISLAMABAD: Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Miftah Ismail said the national economy was in very good shape, and is expected to grow at a 10-year high of six per cent this year with inflation in the reasonable range of 3-4pc.

He said the tax collection by Federal Board of Revenue was also growing significantly, with both the sales and turnover increasing. He acknowledged the current account deficit was on the higher side but CPEC-related machinery imports were bottoming out as energy projects move to the completion stage.

“On the other hand, exports, foreign remittances and foreign direct investments are all growing and bringing in foreign exchange. On top of that, the government did not receive privatisation proceeds over the past many years which would start to flow from next year when the new government takes charge with full mandate,” the advisor said.

He said the country’s $12.5 billion in reserves were insufficient to meet debt repayments for the current year and dismissed that net foreign exchange reserves were in the negative as some wished to believe. He, however, pointed out that the International Monetary Fund (IMF) had a different methodology to look at Net International Reserves without taking into account its own loans.

Based on such calculations, the net foreign exchange reserves should be treated as negative $50bn based on country’s $70bn debt and $20bn total reserves but one doesn’t need to look at the absolute numbers in this case. That, he said, was the reason that the debt limitation law talked about debt to GDP ratio and not about absolute debt numbers.

The advisor stressed that it was important that the size of the economy grows faster than debt to GDP ratio which was generally the case in Pakistan as the GDP is expected to grow by 6pc this year and 7-8pc in the coming years. “We need to maintain the right ratios and we are doing well there,” he said, adding that the external debt to GDP ratio was down from 24pc four years ago to 20.8pc now.

Miftah said singling out one indicator was also not fair, otherwise Japan’s debt was almost 120pc of GDP while many developing countries had 70-80pc debt to GDP ratios and were still doing well.

Calling the accusations of ‘artificial economic stability’ painted by former finance minister Ishaq Dar as unfair, he said the state of economy inherited by him was much worse and the improvement so far is visible to everyone.

Miftah said the health of some public sector entities was in poor shape, resulting in huge injections of public money every year that could otherwise be diverted to health, education, roads and social sectors for the public good. He justified the closure of Pakistan Steel Mills three years ago through gas supply disconnection, saying the company was consuming more than Rs2bn in the shape of cost of gas, salaries and other expenses with sales of around Rs850m, adding that its employee to production rate was 10 times greater than the rest of the world.

Responding to a question, he said the government had allocated Rs115bn tariff differential subsidy for power sector, of which Rs50-60bn had been paid, to be followed by Rs20-30bn payments by Monday next week and then Rs30bn in another 2-3 weeks. “The government was servicing circular debt parked in Power Holding Pvt Ltd through tariff while the fresh circular debt was not a big problem as a plan was already in place to ensure book entries and payments to independent power producers,” he continued.

Commenting on the upcoming budget, he said the focus would be to ensure lower inflation with high economic growth and job creation.

He conceded that the previous free trade agreement with China had some problems and hence the commerce ministry was extra-cautious to have detailed consultations with the local industry. The FBR had some reservations in terms of revenue loss over the next FTA with China but the prime minister ruled out these concerns and directed that the new arrangement should take into account the greater impact on economy in terms of which industries need to be protected or expanded rather than just the revenue.

Published in Dawn, March 17th, 2018