ISLAMABAD: Forecasting a strong current account surplus this year, Finance Minister Mohammad Aurangzeb on Monday ruled out any desperate measures risking undue external pressure, safeguarding hard-earned economic gains.
“Three years ago, the government pressed the growth accelerator, straining the balance of payments,” Aurangzeb remarked during a meeting of the Senate Standing Committee on Finance, Revenue, and Economic Affairs, held under the chair of Senator Saleem Mandviwalla on Monday.
“But no matter how much pressure there is now, we will not repeat that mistake.”
Addressing liquidity concerns, he clarified there had been no complaints about letters of credit (LCs) not being opened in the last 10 months.
“No foreign company has been stopped from sending profits abroad, which shows there’s no pressure on the currency,” the finance czar added.
He also highlighted foreign interest in Pakistan’s economy, mentioning investment commitments from Saudi Aramco, Chinese firm Norinco, and electric auto giant BYD.
“We are finally implementing the reforms proposed by Dr Ishrat Husain in 2019 to strengthen institutions and improve governance,” the finance minister noted.
With challenges like inflation and external vulnerabilities still looming, Aurangzeb expressed confidence in the government’s ability to handle economic headwinds.
“Economy is on the right track,” the finance minister said adding, “Our commitment to reforms and prudent management will steer us toward stability and growth.”
State Bank of Pakistan (SBP) Governor Jameel Ahmed echoed the finance minister’s optimism, forecasting GDP growth of 2.5-3.5% for the ongoing fiscal year.
“Exports are up by 10-12%, and we expect remittances to reach $35 billion this year,” he said.
Ahmed, however, acknowledged a temporary dip in overseas workers’ remittances, which he attributed to a crackdown on currency smuggling and irregular exchange companies.
“These measures will ultimately lead to more formal inflows and stabilise the market,” he added.
The governor also highlighted the foreign exchange reserves position.
“Reserves have reached $11.7 billion, enough to cover 2.5 months of imports and are entirely owned by the government,” he asserted.
The governor informed the meeting that global oil prices had fallen to $70-75 per barrel. “Imports decreased in November, and the petroleum division has deferred LNG procurement,” he added.
Meanwhile, Senator Mandviwalla raised concerns about the central bank’s interventions in the currency market, urging it to cease dollar purchases.
“If the central bank stops purchasing dollars, the exchange rate will stabilise further,” he argued.
In response, SBP governor defended the bank’s market-based approach. “The central bank moves according to market conditions,” he explained, adding, “The IMF closely monitors Pakistan’s economic framework, and if the exchange rate wasn’t market-based, the IMF would have raised objections.”
Updating the meeting on Pakistan’s external debt obligations, the central bank governor said this fiscal year, $5.7 billion in loans had been repaid, with $10 billion more to pay and an additional $16 billion to roll over.
While Senator Shibli Faraz, leader of opposition in Senate, highlighted a Rs400 billion shortfall in tax collection. Responding to this, the the SBP governor said a reduction in interest rates would save the government Rs1,500 billion, which could offset this deficit.
An incredulous Shibli however doubted the sustainability of current measures, saying, “Our foreign exchange reserves are still borrowed.”
Countering Shibli’s claims, the SBP governor assured that Pakistan’s foreign exchange reserves were entirely owned by the government.
“Our reserves have increased without adding to the debt burden,” he stated, denying the reserves were borrowed.
Economic growth for the fiscal year is projected to range between 2.5% and 3.5%, but the governor pointed out inefficiencies in the mines and minerals sector as a drag on growth.
