Rs 30,000 bln inherited debt root cause of economic problems: Hafeez Shaikh

ISLAMABAD:Adviser to Prime Minister on Finance and Revenue Dr Abdul Hafeez Shaikh Wednesday said root cause of the economic problems of Pakistan was the debt of Rs 30,000 billion inherited from the previous government.

Speaking on the floor of the National Assembly, he said the government would return loans of Rs 5000 billion in the year 2019 and 2020.

He said when the government came, the current account deficit was at $ 20 billion and the loans were at $ 95 billion.

In the previous tenure, the dollar was undervalued and dollars were pumped into the economy to keep it inflated. This resulted in drastic reduction in foreign exchange reserves, he added.

He said there was zero growth in the exports in the last five years and imports especially of luxury items increased.

The adviser said when the government came, dollar reserves were depleted and nobody was ready to give loans to Pakistan.

The first priority of the government was to save Pakistan from default and it took bilateral assistance of $ 8 billion from friendly countries and also got facility of deferred payment of oil from Saudi Arabia, he explained.

He said previous governments also took loan from the International Monetary Fund (IMF) so they should not criticize the present government for taking loans from IMF.

He said this time the government took loan of $ six billion from IMF on easy conditions.

Then the government reduced its expenditure and armed forces froze its budget while budgets of houses of President and Prime Minister were cut down.

The IMF loan increased the confidence of international community in the economy of Pakistan and later on World Bank, Asian Development Bank and other financial institutions came to the assistance of Pakistan, he added.

He mentioned Governor State Bank of Pakistan Reza Baqir who left his well paying job at IMF to serve Pakistan.

He said Rs 2200 billion were collected in taxes in seven months. The tax to GDP ratio of Pakistan was among the lowest in the world.

Under the social safety net programme, the budget was increased from Rs 100 to Rs 192 billion, he informed.

Dr Hafeez said cash was transferred to women and loan programmes were started for youth so they could start their own businesses.

He said no taxes were being charged from exporters and electricity and gas was subsidized, loans were given to them and zero tariff was charged on raw materials.

The current account deficit was reduced from $ 20 billion to $ eight billion, he added. He said Pakistan could not collect taxes and could not sustainably grow its economy in different decades.

Dr Hafeez said clarity was needed to put the economy on the path of sustainable economic growth.

He said non tax revenue would be increased to Rs 1500 billion.

The multilateral financial institutions had appreciated the performance of Pakistan and declared it economically stable and suitable for foreign investment, he added.

The adviser said devaluation of dollars had increased the prices of imported items like palm oil, soyabean and petroleum products.

The government gave subsidy of Rs 100 billion to lower the rates of electricity, he said adding circular debt which was rising by Rs 38 billion every year was now going up by Rs 12 billion.

The prices of essential items had come down due to different measures of the government and now the prices would be maintained at the present rates at the utility stores, he continued.

He said utility stores were reaching Rs five million consumers and a subsidy of Rs 7 billion was given to it to provide relief to the consumers.

He said Pakistan could not succeed in 72 years in increasing its exports and failed to strengthen trade relations with other countries. Thailand, China and Korea took their exports to a higher level, he noted.

He said 30 million tonnes more cement was sold as compared to the last financial year.