Export the only way to increase dollar reserves, says Abdul Hafeez Sheikh

ISLAMABAD: Advisor to Prime Minister on Finance Abdul Hafeez Sheikh on Wednesday said there was only one way to swell dollar reserves and that was exports.

“If you need dollars you have to increase exports. One biggest fact affecting the economy is that Pakistan could not succeed in selling its indigenous products to other countries. Pakistan’s fundamental crisis is that we don’t have dollars and we have taken loans in dollars and we are increasing our liabilities in dollars,” Abdul Hafeez Sheikh said while addressing the National Assembly in Islamabad.

In a heartfelt speech, he said Pakistan had never in its history succeeded fully in tax collection. He said there came such eras which expedited economic growth but could not be durable. We will have to find that why the growth rate was not long-lasting, he maintained.

“In 72 years, the biggest fact of this country is that no prime minister could complete his tenure in the country. When we talk about stability we should have this in view. No prime minister could complete a single term,” the finance advisor said addressing the economic debate.

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The economic activities were directly affecting masses, he admitted adding that we would learn from other countries how to make progress.

Opposition should wait with patience for 2023 elections, he said. He said the main thing was that we collaborate on things which were in interest of the country.

“Many a times past, present and future are connected. The root cause of the current economic crisis is that we had 30,000 billion (30 trillion) rupees debt, when we came into power. We had to return 5,000 billion debt immediately in 2019-20,” he said.

Abdul Hafeez Sheikh said current account deficit told about earning of dollars and vulnerability in case of deficit. At one hand such a huge loan (95 billion dollar) and on the other 20 billion dollar deficit were handed over to the incumbent government, he said.

“The previous government ‘s policy was to maintain the exchange rate artificially. When a currency is fixed, it needs investment of huge amount of dollars, which resulted in halving the dollar reserves of the government as dollars were used from public exchequer,” he said.

The PM’s advisor said this policy also surged imports in the country. Every luxury item was imported to artificially maintain the value of the currency, he added.

“Fiscal deficit is the difference between revenue and government expenditure. Reserves nosedived and fiscal deficit maintained upward trajectory as the government spent 2300 billion dollar more than its earning,” he said.

The other challenge Pakistan faced was that its agriculture did not grow significantly, he said. He said if we did not take right measures we were destined to fail.

On criticism of the opposition parties, Abdul Hafeez Sheikh said the last two governments also approached the International Monetary Fund (IMF) for loans. “Nobody goes to IMF with happiness,” he said.

Adviser on Finance Hafeez Sheikh has said that economy has stabilized as a result of historic steps taken by the present government.

Speaking on a motion regarding economic condition in the National Assembly on Wednesday, he said the confidence of the world stands restored on Pakistan. World institutions including the IMF, Bloomberg, World Bank, Asian Development Bank and Moody’s are recognizing government’s economic performance.

The Adviser said the stock exchange stands stabilized and exports are increasing which witnessed zero growth during the five year of previous government.

He said the taxes also witnessed a growth of 16.5 percent during the first seven months of current fiscal year.

Hafeez Sheikh said the current account deficit has been reduced from twenty billion dollars to two billion dollars whilst the fiscal deficit has also been cut.

The Adviser said the government is not only focusing to enhance tax collection but also non tax revenue.

He said we have targeted to fetch one thousand and five hundred billion rupees through non tax revenue during the current fiscal year.

Hafeez Sheikh said the foreign direct investment has doubled whilst the portfolio investment has fetched three billion dollars in the first seven months of current fiscal year. He said tourism has also doubled during this period.

The Adviser on Finance said despite constraints, a serious effort is being made to bring down the prices of essential commodities. He expressed the confidence that the inflation will come down in next one to two months. 

A big relief package has been announced through the Utility Stores Corporation to provide essential items such as flour, rice, pulses and sugar to the people at discounted rates.

He said we are planning to enhance the network of utility stores from four thousand to six thousand in the next few months.

The Adviser said that a ration scheme will also be launched before Ramadan under which the deserving people will be provided with essential items at twenty five percent reduced rates through the utility stores. 

Hafeez Sheikh said the government has increased the funding for social safety nets from one hundred billion rupees to 192 billion rupees, which is an unprecedented increase.

He said steps such as tightening monetary policy and non-borrowing from State Bank of Pakistan have been taken to keep the prices under check.

Hafeez Sheikh said seventy two percent consumers are getting subsidized power including the exporters and those consuming less than three hundred units. He said we are also trying to check power pilferage to reduce the prices of power. 

He said the circular debt was increasing thirty eight billion rupees on monthly basis and we have brought it down to twelve billion rupees.

The Adviser also rejected the impression that auto sale is on the decline. He said different companies have registered increase in the sale of their vehicles.

The Adviser reminded that the country was at the verge of bankruptcy when the present government assumed power. 

He said we inherited a loan of thirty thousand billion rupees and we had to return five thousand billion rupees in the first two years. He said the current account deficit was at the history’s highest level whilst fiscal deficit was also on an upward trajectory. Foreign exchange reserves had nosedived due to the policy of previous government.

The Adviser said the bilateral assistance from the friendly countries amounting to eight billion dollars and the IMF financing of six billion dollars on easy terms as well reduction in our expenditures helped avert the crisis.