“CPEC is advancing at full speed” – Journal
While the Minister of Finance Shaukat Tarin took care of the complementary finance bill 2021, its explanation and the management of the backlash of opposition to the National Assembly, Dr Imtiaz Ahmed, economic advisor, Finance Division, answered Dawn’s questions about the future in detail. The government, he said, is confident that, with sound policies, the national and household economies will fare better in the current year.
Q. Will the economy improve in the coming year? Should people expect some relief?
A. Yes of course we have very visible signs of improvement and the economy has rebounded well. The cautious and active government response to Covid-19 made the V-shaped economic recovery possible, saved people’s lives and livelihoods. We expect good economic growth now and in the years to come.
The latest estimates suggest very impressive performance in the agricultural sector. Available estimates indicate that cotton growth is 32.8% (9.4 million bales), sugar cane 8.2 pc (87.7 million tonnes), rice 5 pc (8 , 8 million tonnes). Large-scale manufacturing grew 3.6% between July and October 2021-22. Between July and November, car production increased by 68.4 pc (85,083 units), tractors by 15 pc (22,034 units), trucks and buses by 64.1 pc (2,559 units), both / three-wheeler 0.8 pc (79,7245 units), cement shipments increased 6.9% (4.8 million tons), oil sales increased 17.6% (9.6 million tonnes).
Instead of leaving the poor at the mercy of the ripple effect, the government provided relief through the Ehsaas and Kamyab Pakistan program. The government has done its best not to shift the burden of rising world commodity prices to the masses.
Q. If the economy is growing, why doesn’t it want to? Will Pakistan meet its growth targets?
A. Pakistan is currently on a path of strong growth. However, it faces imported inflationary pressures like other nations. In addition, the latest Omicron mutant of the coronavirus has cast a shadow of uncertainty on the global economy. Still, there are strong growth expectations in 2021-2022.
It should not be overlooked that the impact of economic growth on the general public takes time to be felt. The government’s measures aim to achieve more inclusive and sustainable growth. To this end, the government has taken various initiatives in favor of growth.
Q. Do you think it was a mistake not to make access to the generous stimulus plan for the private sector conditional on job creation and wage increases?
A. Conditional aid in times of crisis is never a good idea. For our part, we announced the largest fiscal stimulus package ever, worth Rs 1 240 billion, which covers emergency response (Rs 190 billion), business support (Rs 480 billion) and l aid to citizens (570 billion rupees).
It should be mentioned that the fiscal stimulus plan was complemented by liquidity support for industry, in particular small and medium-sized enterprises (SMEs) from the State Bank. A social housing construction and job creation program was also announced. The Ehsaas Emergency Aid Program and the SME Incentive Program provided support, especially to poor families. Due to the appropriate response to the Covid epidemic, the Pakistani economy has not suffered as much as others.
Q. How much more money was invested in the real estate sector after the amnesty program?
A. Under Section 100D (Special Provisions Relating to Builders and Developers), so far a total of 2,238 applications have been made to benefit from the program, with a total project cost of around 556 billion rupees.
Q. How do you assess the situation of economic diplomacy when the West seems insensitive and the East passively reluctant?
A. Pakistan enjoys a very strategic position geographically, politically and economically. It maintains strong diplomatic relations with the West and the East. The main destinations for Pakistan’s exports are the United States, followed by the Eurozone and the United Kingdom, and import destinations include China, the United Arab Emirates, and European countries.
Remittances are from Saudi Arabia (26pc), United Arab Emirates (21pc), GCC (11pc), UK (14pc), USA (9.4pc) and of the EU (9.5 pc). Foreign direct investments come from China (41 pc), the United States (9.0 pc), Hong Kong (8.4 pc), the United Kingdom (7.7 pc), the Netherlands (5 , 7 pc) and the United Arab Emirates (5.5 pc). Thanks to our successful diplomacy, 1,775 healthcare professionals (doctors / nurses / technicians) have traveled to Kuwait to work there since October 2020.
Japan and Korea are also keen to benefit from our growing workforce. The Korean government has decided to lift visa restrictions for foreign workers, paving the way for Pakistani workers to enter the Republic of Korea. Pakistan and Japan signed a cooperation protocol that would allow skilled Pakistani workers to obtain employment in East Asian countries.
In Afghanistan, Pakistan assisted personnel from NATO and other embassies to ensure safe passage. In December 2021, Pakistan hosted a conference of foreign ministers of OIC countries to avert a looming humanitarian and economic crisis in Afghanistan.
Q. When will the International Monetary Fund (IMF) program be relaunched? Can Pakistan finish it? How do you intend to contain the negative impact of stabilization on businesses and individuals?
A. After the completion of negotiations under the sixth quarterly review of the ongoing Extended Financing Facility (EFF) program, the government and the IMF reached a staff level agreement on November 21, 2021. It is expected that all prior actions under the said review, which includes the adoption of the Supplementary Finance Bill and the State Bank of Pakistan Amendment Bill, will soon be completed. The board meeting is scheduled for January 12, 2022, which will approve the $ 1 billion disbursement under the EFF program.
Our commitment and hard work helped us to complete the stabilization phase. To alleviate the painful impact of stabilization measures, we have introduced measures in all sectors of the economy to stimulate growth, with a clear roadmap of strategic priorities, business facilitation, investment opportunities , income and expense plans. In addition, we have launched various social sector development programs to improve people’s well-being.
In agriculture, various programs have been launched such as the national agricultural emergency program, the agricultural transformation plan, the Kamyab Kisan program, etc. Agricultural credit, sale of fertilizers, production and import of agricultural machinery show healthy growth.
In the industrial sector, the government grants monetary and fiscal incentives, including exemptions on raw materials, fixed tax regimes and simplified tax returns, risk sharing regimes and unsecured loans for SMEs, special tariffs electricity for industrial use, a new automobile policy, reduction of the tax on textile products and tax relief for petroleum refineries. In addition, long-term trade finance (LTFF 5pc) and an export refinancing program (ERS 3pc) are provided.
As part of the social protection program, for 2021-22, the allocation for the Ehsaas program has been increased from Rs208bn to Rs252bn.
On the basis of these measures, we hope that the economy will perform better in the coming year.
Q. The urban salaried middle class, the political base of the PTI, has been under crippling stress. Do you have a plan to maintain the support of this dynamic class in the 2023 election?
A. The government is taking political, administrative and relief measures to reduce the impact of imported inflation on the population. The surge in international food prices is mainly due to declining global food production and high demand due to the pandemic and supply chain disruptions, which were partly transmitted to the domestic market as the government amortized it. A 120 billion rupee relief plan has been announced to offer a 30% discount on ghee, flour and pulses to 130 million people over the next six months.
The government is very determined to keep the support of this dynamic class through various initiatives such as Sehat Sahulat program, Kamyab Pakistan program (KPP), Kamyab Jawan program and Hunermand Pakistan. We have granted a disparity reduction allowance of 25% of the basic wage, the minimum wage has been increased from Rs 17,000 to Rs 20,000 in 2021-2022, and approximately 45,000 social housing units are under construction.
Q. When will the China-Pakistan Economic Corridor be visibly revitalized?
A. The CPEC is advancing at full speed.
Q. How does the growing influence of TLP and likes under government patronage have a direct or other impact on the economy?
A. We cannot deny the fact that Pakistan has suffered from violent protests from different religious and other groups in the past. The recent economic recovery has been a source of boundless optimism, but the country has been hit hard by the unrest.
We must not be in denial and accept the fact that the economic bill of agitations is very high with the human cost. It creates a negative image and sends the wrong message to investors.
In addition, blockages disrupt supply chains, restrict the mobility of people, damage public and private property, and suspend business and commerce.
Q. What is the biggest obstacle on the way to inclusive sustainable growth?
A. Macroeconomic imbalance is the biggest obstacle. Import-driven growth has always resulted in twin deficits, making it difficult to maintain GDP growth above 5pc. It causes a balance of payments crisis as well as fiscal imbalances.
Posted in Dawn, The Business and Finance Weekly, January 3, 2022