The finance minister said that due to the cheap prices of raw materials and petroleum products during the COVID-19 pandemic, the balance of payments (BoP) situation has eased and foreign exchange reserves have increased .
ISLAMABAD, (UrduPoint / Pakistan Point News – June 9, 2022): The Finance Minister said that due to cheap prices of raw materials and petroleum products during the COVID-19 pandemic, the balance of payments situation (BoP) eased and foreign exchange reserves climbed.
When prices started to climb, the previous government failed to manage the balance of payments situation and as a result, foreign exchange reserves once again dipped below $10 billion, which does not was not an encouraging sign, he added.
Reserves, however, would exceed $12 billion within a week due to the influx of $2.4 billion from China, the minister said.
Miftah said that to streamline the economy, the coalition government had to make tough decisions to save the country from default. With the difficult decision to raise oil prices by Rs 60 per litre, “we have managed to avoid an imminent default. We will now move into the stability phase and then into the sustainable growth phase.” He said that during the COVID pandemic, the previous government had a good opportunity to sign long-term agreements, but it failed to do so. “The world also gave us incentives during the pandemic, but the government at the time failed to manage the fiscal space, and as a result, the DAC increased.” He said the PTI regime had laid “economic landmines”, which were in fact directed against the state of Pakistan and not against the current coalition government. The entire nation has had to deal with power cuts of several hours due to their mismanagement.
The minister said that the country’s foreign direct investment (FDI) in 2017-2018, the last year of the PML-N government, was $2 billion, which was reduced to $1.25 billion during of the outgoing fiscal year.
Similarly, he said, the Federal Council’s tax collection of revenue accounted for more than 11 percent of GDP during the last term of the PML-N, but the PTI government failed to do so. increase in the first three years and even in the fourth year it could not reach 11%, when it should have been above 15%.
The minister said the budget deficit was expected to be around Rs 5.6 trillion, however, the coalition government was trying to reduce it.
In the first year of the PTI government, the budget deficit was 9.1 percent of GDP, which was a record in the country’s history, he added.
Miftah said the average budget deficit for five years (2013 to 2018) of the last PML-N government was 5.1% of GDP in five years (2013 to 2018). During the last year of the PML-N government, the deficit was Rs 1,600 billion whereas it should have been Rs 5,000 billion during the last year of the PTI regime.
He said debt service in 2017-18 was Rs 1.5 trillion while it was Rs 3.1 trillion in the outgoing fiscal year. The coalition government would pay 3.9 trillion rupees in debt service next year.
Planning Minister Ahsan Iqbal said the GDP growth rate was showing higher figures due to the change in the basis of the economy. “If we look at the original base, the numbers will be very low.” He said that the development sector was the most affected in the outgoing fiscal year, against a total allocation of Rs 5.5 trillion under the Public Sector Development Program (PSDP), only Rs 900 billion. rupees have been released.
“When public sector investment declines, private sector investment also declines because the two are linked,” he added.
In 2017-2018, he said, the western world was ready to invest in Pakistan, but the PTI government failed to attract investment.
Ahsan Iqbal argued that no government would ever want to impose a burden on the common man by raising the price of petrol by Rs 60 per litre. “We delayed the price increase for a month as we explored the possibility of creating fiscal space to continue the subsidy, however, we could not find space and had to make a difficult decision.” He said that for a big country like Pakistan, at least Rs 2 trillion should be allocated to the federal development program to meet the needs of the people.
On a question, Miftah Ismail said that after the budget, the government will engage the International Monetary Fund (IMF) with better reforms.