Economy out of crisis phase - Finance Minister

Finance Minister Asad Umar is chairing Economic Coordination Committee (ECC) meeting in Islamabad on April 08, 2019 – (PID)
Updated 09 April 2019

Economy out of crisis phase - Finance Minister

  • Says next 18 months will be stabilization phase
  • Emphasizes need to integrate exports with global value chains to get maximum benefit

ISLAMABAD: Pakistan’s economy has moved out of crisis and entered into the stabilization phase, Finance Minister Asad Umar said on Monday.

Addressing a ceremony in Islamabad, he said the structural economic issues will be addressed through a public financial management law to overcome fiscal and current accounts deficit, boost exports and investments.

“The crisis phase of Pakistan’s economy is over, and we have now entered the stabilization phase that will continue for the next one and a half year,” said the minister unveiling a medium term economic framework – a set of economic plan that lists the government’s priority strategies, actions and outcomes.  

He said the policy framework incorporates input from the International Monetary Fund (IMF) and was subsequently also shared with the body. “The talks with the IMF (for a bailout package) are in its final stage,” he said, “the numbers will be shared after the loan details have been decided.”

The country is struggling to bring down its current accounts deficit from $19 billion in the last fiscal year to stave off an economic meltdown and bring financial discipline in tax revenue collection to achieve sustainable growth.  

Since coming to power in August, the government has been in talks with the IMF over the 13th bailout package since the 1980s which is expected to materialize in the next few weeks. “We lack savings and its ratio is the lowest in the region. Our exports have declined. That’s why we are going to the IMF,” he said.

Listing three “chronic problems” on the economic front, he said that Pakistan was faced with fiscal and current accounts deficits, declining exports and gap in the savings and investments.

The government is paying Rs800 billion on interest payments on debts, he said, adding that the country’s exports have decreased from 13.5 percent of its Gross Domestic Product (GDP) in 2003 to 8.5 percent last year.

“Our national saving rate was 10 to 11 percent of the GDP last year which is much lower as compared to other countries,” he said, adding that at this rate, the government would not be able to generate employments and bring investments.

Talking about the tax reforms, he said the government planned to increase the revenue by using modern technology like artificial intelligence and data analysis. “A simplified tax system will be introduced in the upcoming budget,” he said, adding that a tax amnesty scheme will be introduced to bring more people in the tax net.

Admitting “complete breakdown of financial discipline,” he said that a public financial management law will empower the Parliament to take all monetary decisions instead of the federal government.

Talking about exports, he said the government has restored liquidity of exporters by clearing their refunds of billions of rupees and taken numerous other measures to ensure competitiveness of the export industry in the international market.

“We have to integrate our export businesses to the global value chains to become part of the global $70 trillion economy,” he said while stressing the need for regional connectivity to enhance bilateral trade with countries like Afghanistan, Tajikistan, India and Turkey.

Defending the rupee devaluation, which has lost about 25 percent of its value over the past year, the minister accused the previous government of “ruining the economy by artificially keeping the rupee overvalued.”

“The rupee is in equilibrium now," he said adding that "the exchange rate is not a symbol of economic strength of any nation."


Abu Dhabi’s Mubadala to invest €1bn in French state-backed fund

Updated 45 min 14 sec ago

Abu Dhabi’s Mubadala to invest €1bn in French state-backed fund

  • State-backed investment bank Bpifrance and Mubadala will both commit €1bn to the fund to support French companies
  • Bpifrance has said it aims over time to raise up to €10bn for the fund, which is to be used to shore up the capital of French companies

ABU DHABI: Abu Dhabi state investor Mubadala Investment Company will invest €1 billion ($1.08 billion) in a new French state-backed fund to support French companies, France’s finance minister said on Monday.
State-backed investment bank Bpifrance and Mubadala will both commit €1bn to the fund which will launch next month, Finance Minister Bruno Le Maire said. Additional commitments from institutional investors such as insurers will bring the total invested to four billion, he said.
“The first foreign sovereign investment fund to invest in the French fund is Abu Dhabi’s,” Le Maire told reporters during a visit to Abu Dhabi.
“It’s sends a strong signal that Abu Dhabi’s fund is investing €1bn.”
Bpifrance has said it aims over time to raise up to €10bn for the fund, which is to be used to shore up the capital of French companies facing activist investor campaigns or adapting their business models or shareholder bases.
Bpifrance’s pitch on the fund to outside investors has said it would deploy capital in about 15 companies with a time horizon of 10 years.
Mubadala said in a statement that it saw “significant investment opportunities” in France and said that the fund would invest in companies with “compelling returns.”