The United Arab Emirates would invest in Pakistan stocks on a “buy-back basis” (reinvestment), Finance Minister Miftah Ismail confirmed on Saturday, describing it as beneficial for the country.
“I had met them [UAE government] in Eid and said that you had given us $350 and $150 worth of loans in 1996 and 1997,” he said while addressing a press conference which was focused on the economic situation and the government measures at the Karachi Chamber of Commerce and Industry.
The finance czar landed in Karachi, from where he contested general elections in 2018, to convince the business community to boost its exports in order to boost the economy. He also briefed them about the government’s decision to impose new taxes to meet the tax collection target.
“We are not ready to return it. Reroll it. And I asked them for some more deposits,” Miftah said and quoted that they said, “you never return loans so why you are asking for more loans” as people at the presser laughed.
The finance czar lamented $450 worth of loans still due and described it as a “moment of shame”. He wondered where did the country invest such an amount while criticised the high amount of imports.
“I feel shameful, honestly speaking, when you ask someone to demand more loans from the country to whom you are already indebted,” the finance czar said and repeated the country’s trend with phone calls from PM Shehbaz and army chief General Qamar Javed Bajwa.
‘Cut your coat according to your cloth’
Miftah said that the government would not have to turn to friendly countries if $80 billion worth of imports and $30 billion of exports numbers reversed.
“Cut your coat according to your clothes,” he said and explained the budget deficit was a result of the government’s “dis-saving” that prompts it to seek money. The private sector does not have money to offer as their saving was limited to their investment.
“The loan you take from foreign countries are coming in form of import, which we call current deficit,” Miftah explained, “current account deficit is called twin deficit theory which is the budget deficit amount is equal to the current deficit.”
Dearth of export-based growth
He admitted that Pakistan has an import-based growth and it never followed export-based growth.
“The model of import substitution is not a subject for us and countries which have made developments have followed export-led growth,” he said, “And we are not able to do it.”
Compromising sovereignty for loans
“You call it deposits, loans or investments, basically it is that you have to return the money and you compromise you sovereignty,” he said, “this happens why should we lie.” Such a trend leads to increased import bill
The minister blamed all previous governments for such a decision, including the PML-N. He lamented that the investment made by many foreign countries was not utilised properly, adding that wedding halls were being constructed through the money coming from coal plants set up by Chinese companies.
“Exports could have been increased and supported our cost if we had invested that money,” he said, “this nation did not do productive work. Difficulty will be there for you [traders] in next two to three months,” he said while seeking excuse from them on the ban imposed on imported items which number around 84 to 85.
He accepted traders’ demand to decrease taxes, adding that the government would have a meeting with jewellery shop owners to revise taxes. “We will do the needy settlements.”
Miftah admitted his mistake of imposing taxes even on small traders or shops which are closed, saying that he did think about it before taking the decision.
“Electricity will be cheap in two to three months,” he said, “valuable tax will be increased in October when commercial electricity gets cheap. Sales tax, which is 5%, and income tax, 7.5%, will be increased to 7.5% and 10% from October 1.”