Pakistan aims to spur economic growth to 6%

Pakistan economy is on the right track to post ‘an inclusive and sustainable growth’ of up to five per cent this year that will help the country to get rid of the International Monetary Fund (IMF) in September, its top official says.

Finance Minister Shaukat Tarin, who steers tough economic reforms, is confident of accelerating the country’s gross domestic product (GDP) growth to six per cent in the next fiscal year starting in July.

“We don’t need the IMF if we achieve sustainable growth of six per cent. I don’t think we need another IMF programme once we complete the ongoing extended fund facility (EFF) in Setptember,” Tarin told Khaleej Times in an exclusive interview in Dubai.

Pakistan, which secured more than 20 bailouts from the IMF in the past five decades, signed a $6 billion loan programme in July 2019. It completed the fund’s six reviews and drew $3 billion so far to support the country’s foreign exchange reserves, which currently stood firm at $23 billion.

“We are going to start a two-week process of seventh IMF review of Pakistan economy on Monday [March 7, 2022]. The successful review will help draw another $1 billion tranche as we have already achieved the targets in December,” Tarin said, and adding that the eighth and ninth reviews will bring the remaining $2 billion to the national kitty by September.

The IMF, which forecasts four per cent GDP growth for Pakistan, said the EFF programme had strengthened Pakistan’s fiscal buffers before the start of the Covid-19 pandemic, and a strong economic recovery has taken hold since the summer of 2020. It also warned that Pakistan’s economy remains vulnerable to flare-ups of Covid-19, tighter international financial conditions, a rise in geopolitical tensions and delayed implementations of structural reforms.

No more IMF help

“The sustainable growth of five to six per cent is the only way to reduce dependence on IMF and other multinational donars, and we are confident of achieving this target under the leadership of Prime Minister Imran Khan,” the finance minister said.

Elaborating, he said the government’s economic reforms had revived sick industries, improved the agriculture sector and boosted exports despite commodity price shock in international markets. However, the country still needs to increase saving rates and revenue collection to sustain the growth momentum in coming years.

“We are working very hard to increase saving rates and tax collections as well as bridge the gap between exports and imports. Revenue collections have already hit Rs6 trillion, and next year we will achieve Rs8 trillion taxes,” Tarin said.

Economic experts said the rate of savings, which is currently around 15 per cent, should be increased to 25 per cent in Pakistan. They also said the tax-to-GDP ratio should also be increased to 20 per cent from 10 per cent to sustain higher growth momentum.

“Pakistan’s information technology has an immense potential to grow, and the government is keen to revolutionise this sector to boost exports in coming years. We can double our traditional exports in next four to five years and lift IT exports by providing incentives to the sector and building a strong ecosystem for startups in the country,” the finance minister said.

“In the next five years, our traditional exports will touch $60 billion plus while IT exports could be at $50 billion, pushing the tally to over a $100 billion annually. In addition, $30 billion remittances per annum will help ensure a sustainable current account surpluses,” he added.

Plan for 10 million jobs

Tarin, an industry veteran, said the government is also focusing on improving productivity by reviving industries and improving the agriculture sector with the help of China.

“We would like to consolidate our industrial sector and attract foreign investment in key industries. China will move its part of industrial units in Pakistan’s special economic zones that will generate more jobs opportunities in the country,” the finance minister said.

“China has planned to shift up to 85 million jobs to foreign countries in next 10 years. We have requested Chinese leadership to move at least 10 million jobs to Pakistan by relocating its key industrial units to special economic zones in the country,” he said.

In reply to a question, the finance minister said China would increase imports from Pakistan that will also improve productivity and generate more opportunities for jobs in the country.

“The Chinese move will be helping us to create 1.5 million to two million jobs annually in next five years. It will be a game-changer for Pakistan, whose 60 per cent population is under the age of 30,” Tarin said.

“Prime Minister Imran Khan have successful meetings with Chinese President Xi Jinping and Premier Li Keqiang, and they promised to resolve Pakistan’s economic problems,” he said.

In reply to a question about challenges ahead, the finance minister said ‘super cycle’ poses a serious threat to global economic recovery, and Pakistan has no exception.

“No one should have a doubt that Pakistan economy is on a growth path as agriculture, industries and services sectors are performing well, but this super cycle is putting pressure on prices and causing unrest and frustration among the masses. Our challenge is to make sure that this frustration doesn’t spill on the street, and if we sustain this pressure in the next six to nine months, then we will be fine for the next general elections in 2023,” the finance minister said.

Inflation check

About the inflation, he said commodity prices in international markets are on the rise, and the government is making all-out efforts to minimise its impact on common man.

“Crude prices crossed $100 a barrel while edible oil also traded in the high territory. We have reduced petroleum development levy to a minimum and introduced stringent measures to absorb price shocks of the super cycle,” Tarin said, adding that the prices will drastically come down in coming months after freezing petrol rates and electricity tariff at present levels until June.

“We are oil importing nation and providing petrol in the country at prices charged by oil producers with no subsidy,” the minister said.

Pak rupee stability

To a question about the Pak rupee outlook, the minister said it is stable at the current levels, and no more devaluation is on the cards.

“The rupee-dollar parity reflects the market trends and is unlikely to face serious volatility. It should trade in present range with some normal fluctuations against the US dollar and other major currencies,” he said.

Tarin, 68, further said the government would continue to test bonds and the sukuks market to raise funds to support foreign exchange reserves.

“We have planned to raise $1 billion through an ESG-compliant Eurobond in March,” he said.

Realise RDA potential

The finance minster reposed trust in Roshan Digital Accounts and its future scope to attract over nine million overseas Pakistanis worldwide and said the banks should come forward to realise the true potential of this revolutionary scheme.

“Banks should adopt a ‘push strategy’ to tap more overseas Pakistanis by creating awareness about RDA and its products. The banks in UAE are doing an excellent jod with an aggressive approach, and the other lenders should adopt a similar strategy in Saudi Arabia, Europe and the United States,” Tarin said.

“We need to strengthen sales team in Gulf and other developed markets to realise the true potential of RDA,” he said.

— muzaffarrizvi@khaleejtimes.com