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Pakistan is in no rush to enter into IMF program: Asad Umar

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December 15, 2018: Finance Minister Asad Umar has said that Pakistan is in no hurry to strike a deal with the International Monetary Fund to deal with its balance-of-payments crisis, adding that funding from “friendly countries” would help shore up the economy over the remainder of the current financial year.

“We are in discussions with the IMF. When we reach the outlines of a program which we believe is in the best interests of Pakistan’s economy, we’ll go ahead and sign that”, Umar told Arab News.

Umar said that pressure to rush a deal with the IMF through had eased, owing to a combination of bilateral financial support from historical allies and a host of economic measures taken by the government.

“So I’ve saved $6-7 billion of my financing need and then I’ve arranged funding from bilateral sources to bridge the gap,” Umar said, referring to a $6 billion package agreed on with Saudi Arabia this October and expected aid from China and the UAE.

Umar denied that the government had allowed the rupee’s value to drop in order to fulfill a precondition of an IMF bailout. He said the main sticking point in negotiations with the organization was the pace of reforms.

“We believe that if you try and make reforms too quickly, if you try and make an adjustment too quickly, you’ll crash the economy,” the minister said. “And that is not in our interests, not even from a debt-sustainability point of view.”

Asked whether reviewing agreements related to the China-Pakistan Economic Corridor (CPEC) program was off the table, the finance minister said: “Not at all.”

“If it’s (a question of) transparency, then transparency is available,” he said, stressing that contracts with China had been signed in accordance with “well-established rules.”

Umar also noted that Pakistan had satisfied all concerns raised by the IMF and US officials with regard to CPEC.

Giving details of the Saudi package of $3 billion in foreign currency support for a year and a further loan of up to $3 billion in deferred payments for oil imports, the finance minister said $1 billion of the $6 billion package had been disbursed so far.

“It’s not a rescue package, it’s a financing package,” he said. “Saudi Arabia will earn a rate of return on that investment.”

Umar explained that the pending agreements with China and the UAE were also not aid packages: “These are all financial transactions. There are loans, there are trade finance facilities. Pakistan is not taking aid from anyone.”

Referring to a recent World Bank report that said trade between India and Pakistan was far below its potential of $37 billion, the minister said Pakistan was ready to engage in a constructive trade dialogue with its neighbor but “it can’t be a one-sided relationship.”

Umar ruled out any discussions on trade with India before general elections there in 2019 and said Pakistan would not take “any kind of unilateral step” when it came to granting India Most Favored Nation (MFN) trade status, a proposal that past governments have toyed with.

On the government’s promise of attracting investment from Pakistanis living abroad, the finance minister said rules for a diaspora bond were approved by the Cabinet a week ago and the bond would be issued late December or January.

The minister said despite “doom-and-gloom” scenarios painted by critics, he owed his optimism about Pakistan’s future to the fact that he was a “data-driven person.”

“I’m sure you would have heard people say, ‘Business is not investing in Pakistan anymore,’” Umar said. “But if you look at private sector credit off take — a useful metric to measure business investment — it was five times more in the first quarter of this year than in the first quarter of last year.

“So where is this business which is not investing?” he continued. “I’ve got a whole host of businesses which are coming in, international businesses coming in, all saying we want to invest hundreds of billions in Pakistan.”

Posted on: 2018-12-16T00:03:00+05:00

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