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Pakistan cannot get out of the current economic crisis no matter what it does, the country’s former finance minister Miftah Ismail said in an explosive speech on Saturday. “This long-term unsustainable deficit…unless Pakistan ends this, it cannot get out of this bhanwar,” Ismail, who served as the country’s finance minister from April 2022 to September 2022, said.
“And I can’t think that under the current tax structure, even if you double or triple the tax structure – you can’t get out of this bhanwar (mess),” Ismail said while speaking at an event ‘Reimagining Pakistan’ at a government college in Lahore.
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Pakistan has descended into deep a economic crisis due to a steep fall in forex reserves and soaring inflation with almost no economic growth. The cash-strapped country has been staring at default as it doesn’t have money to service its external debts. Its only hope is the IMF, but it has withheld the bailout package over the country’s revenue shortage concerns.
“Pakistan has stuck in a very complex situation,” the outspoken finance minister said. “And until it increases its tax-to-GDP ratio by 15 per cent, and export-to-GDP ratio by 15 per cent, we will not be out of the problems.” He said Pakistan has to pay $25 billion each year. This is creating trouble and there is no escaping that, he said.
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Ismail said Pakistan will have to struggle every year to save itself from default. He recalled his time at the finance ministry and said when he was there, his prerogative should have been to control inflation and boost economic growth. “But my effort was to prevent the default,” he admitted.
Pakistan’s inflation has crossed over the 40 per cent mark and the growth this year is expected to be 0.5 per cent, according to the IMF.
“We will be in the same dilemma for the next two years, and will go into one more IMF Programme,” he said. “But I don’t think we can get out of this until or unless we do radical reforms including the structure of the budget.”
The former finance minister then explained the causes behind the current crisis in Pakistan. He said the inflation was high because productivity had not increased for a very long time. He said the country’s population was increasing at a record pace and was doing worse compared to Bangladesh.
Ismail said one reason Pakistan had not been able to export anything was terrorism. “We can’t export, because nobody wants to come to Pakistan,” he said. “You can’t find any foreigner in any big hotels in Lahore…can you imagine that Dhaka airport has a lot more foreign airlines coming than Lahore and Islamabad combined,” he said.
The former finance minister said that not one dollar of investment comes to Pakistan for export purposes. He said only those companies come there that want to sell their products to Pakistanis.
Pakistan is hoping to get a tranche of $1.1 billion dollar from the IMF, which will also unlock funding from friendly countries like Saudi Arabia and China. However, experts believe that even this bailout package won’t save Pakistan and it will have to go for debt restructuring.
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