Aurangzeb assures Pakistan won’t risk external pressures in growth pursuit

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ISLAMABAD: Finance Minister Senator Muhammad Aurangzeb on Monday vowed to refrain from taking risky development policy decisions that would cost the country all its recent economic gains and invite external pressure.

During a meeting of the Senate Standing Committee on Finance, Revenue and Economic Affairs chaired by Senator Salim Mandviwala on Monday, Aurangzeb remarked, “Three years ago, the government accelerated the growth rate, which strained the balance of payments. “.

“But no matter how much pressure there is now, we will not repeat this mistake,” the minister said, predicting a strong current account surplus this year.

Allaying liquidity concerns, he clarified that there are no complaints of non-opening of letters of credit (LCs) in the last 10 months.

“No foreign company has been prevented from repatriating profits abroad, which shows that there is no pressure on the currency,” the finance czar added.

He also highlighted foreign interest in Pakistan’s economy, citing investment commitments from Saudi Aramco, Chinese firm Norinco and electric auto company BYD.

“We are finally implementing reforms suggested by Dr. Ishrat Hussain in 2019 to strengthen institutions and improve governance,” the finance minister noted.

With challenges such as inflation and external threats, Aurangzeb expressed confidence in the government’s ability to deal with economic difficulties.

“The economy is on the right track,” the finance minister said, adding, “Our commitment to reforms and prudent management will lead us to stability and growth.”

State Bank of Pakistan (SBP) Governor Jameel Ahmed, echoing the finance minister’s optimism, predicted a GDP growth rate of 2.5-3.5 percent for the current fiscal year.

“Exports have grown by 10-12 percent, and we expect remittances to touch $35 billion this year,” he said.

Ahmed, however, acknowledged a temporary drop in remittances from overseas workers, which he attributed to currency smuggling and a crackdown on unregulated exchange companies.

“These measures will ultimately lead to more formal inflows and stabilize the market,” he added.

The governor also highlighted the position of foreign exchange reserves.

He asserted that reserves have reached $11.7 billion, enough to cover 2.5 months of imports and are fully owned by the government.

The governor told the meeting that the global oil price has fallen to 70-75 dollars per barrel. He added that imports fell in November and the petroleum division postponed LNG purchases.

Meanwhile, Senator Mandviwala expressed concern over the central bank’s intervention in the currency market, urging it to stop buying dollars.

“If the central bank stops buying dollars, the exchange rate will become more stable,” he argued.

In response, the State Bank Governor defended the bank’s market-oriented approach. “The central bank moves according to market conditions,” he explained, adding, “The IMF keeps a close eye on Pakistan’s economic framework, and if the exchange rate were not market-based, The IMF would raise objections.”

Updating the meeting on Pakistan’s external debt obligations, the central bank governor said that in the current fiscal year, loans worth $5.7 billion have been repaid, with another $10 billion due and more. $16 billion is outstanding.

While the leader of the opposition in the Senate, Senator Shibli Faraz highlighted the shortfall of 400 billion rupees in tax collection. Responding to this, the State Bank Governor said that the reduction in interest rates would save the government Rs 1,500 billion, which could cover the deficit.

An incredulous Shibli, however, doubted the sustainability of the current measures, saying, “Our foreign exchange reserves are still on loan.”

Countering Shibli’s claims, the State Bank Governor assured that Pakistan’s foreign exchange reserves are fully owned by the government.

“Our reserves have increased without increasing the debt burden,” he said, denying borrowing from the reserves.

Economic growth for the fiscal year is estimated at between 2.5% and 3.5%, but the governor identified inefficiencies in the mines and minerals sector as a drag on growth.