ISLAMABAD, AUG 5: Finance Minister Miftah Ismail said on Friday that the government would control imports for the next three months, even if it came at the cost of slower growth.
“I will not allow imports to increase for three months and, in the meantime, we will come up with a policy. I understand that growth will be reduced for a bit but I have no other choice,” he said while addressing a ceremony at the Pakistan Stock Exchange (PSX).
Talking about the exchange rate, Ismail noted that dollar outflows had been surpassing inflows, which is why the rupee had fallen sharply against the greenback over the last month.
“Even a small shopkeeper knows that if your sale is Rs30,000 a day and you buy stock worth Rs80,000, then you need to reduce the stock you buy. We did the same. We reduced imports to $4.9 billion from $7bn and all problems ended.”
The finance minister noted that the government’s import restrictions would affect the automobile and electronic appliances industries. He said he did not want to create unemployment and his first priority was the reduction of imports.
“When there was pressure, we imported a lot of oil and gas. At this time, we have [stock of] 30 days for diesel and petrol. We have furnace oil [supply] for six months. We are very comfortable in terms of our energy security and energy supply, and other obligations. We will control imports for the next four months.”
The minister pointed out that the country’s import bill in June was $7.7bn and if the current account deficit widened to such an extent, it would create pressure on the rupee.
Pakistan’s import bill for the previous fiscal year stood at $80bn while its exports amounted to $31bn. “No country can grow and be stable with this kind of current account deficit.”
He said that while it was a good thing for developing countries to run a small deficit, Pakistan had failed to productively use its long periods of deficit.
The PML-N government, during its previous tenure, had set up power plants generating 11,500MW of energy but doubling electricity generation had not led to a doubling in the industrial and export sectors, he rued.
“Other countries like China set up factories after setting up power plants. We only built wedding halls and we did not [earn] foreign exchange.”
The minister said that while he believed in the model of export expansion and not import substitution, the government needed to control the budget deficit for which immediate steps needed to be taken.
He added that while the economic situation of Bangladesh, Vietnam and Pakistan was similar in the nineties, now their exports were $100bn and Pakistan had to “ask for money at every place”.
“It’s no fun. I think it’s time that we act like a mature, dignified nation. The new tax-to-GDP ratio is 9.2 per cent. You cannot run a country on this. You need more money.”