Pakistan's finance minister criticizes manufacturers for importing parts instead of building them

Men walk along a street at a car part and repair market in Rawalpindi, Pakistan, on November 9, 2020. (AFP/File)
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Updated 17 August 2022

Pakistan's finance minister criticizes manufacturers for importing parts instead of building them

  • Miftah Ismail says cellphone manufacturers were only adding five percent value to their products
  • He points out that automobile manufacturers had not exported cars to lucrative destinations in 30 years

ISLAMABAD: Federal Minister for Finance and Revenue Miftah Ismail on Wednesday highlighted the structural problems of the country’s economy, saying that Pakistani companies preferred to import parts of their products instead of manufacturing them indigenously at home.

The government recently imposed a temporary ban on the import of luxury items since it was facing a massive current account deficit along with dwindling forex reserves and a rapidly depreciating currency.

The finance minister issued the statement against the same backdrop while addressing a conference of business leaders in the federal capital where he specifically mentioned the country’s cellphone and automobile manufacturers.

“We have given subsidies and 10 percent duty advantage to mobile industry to manufacture phones in Pakistan but their value addition is not more than five percent,” he said. “They get all of their parts from outside and only assemble them here. We have given double duty protection than its value addition and the same thing holds true for car manufacturing companies as well.”

Ismail noted that automobile manufacturers had been working in Pakistan for more than 30 years, but they had not exported vehicles worth a single dollar.

“Pakistani companies are selling inside the country only, though they should try to sell [their products] in rich markets of the United States, Europe and far eastern countries,” he added. “They sell locally to earn more profit because it is a protected market.”

The minister pointed out that out of Pakistan’s $30 billion exports, around $20 billion were generated by the textile sector.

“We import $80 billion worth of goods from abroad which is unsustainable,” he continued. “Our industries have to increase exports instead of only making local sales.”

Ismail also maintained that agriculture was the backbone of Pakistan’s economy, though he added it needed more innovation by adopting advanced Agri-Tech.

“My focus is to strengthen our agriculture as we have imported $450 million tons of wheat this year and more is still required,” he said.

The money spent on the import of wheat, the minister continued, could be used to support farmers and introduce latest technology in the sector.

Pakistani FM says water receded 50 percent in flood-ravaged Sindh

Updated 06 October 2022

Pakistani FM says water receded 50 percent in flood-ravaged Sindh

  • An estimated 400,000 people are living in tents or relief camps in Pakistan's Sindh
  • Thankful to world community but we need more assistance, says foreign minister

ISLAMABAD: Pakistan’s foreign minister on Thursday said that about 50 percent of the water has receded in the country’s worst-hit southern Sindh province, raising hopes that farmers will be able to sow wheat in a first step toward returning to a normal life.
“We are utilizing all of our resources for draining the remaining water in flood-affected areas in Sindh,” Bilawal Bhutto Zardari told a news conference. It was the first time that any official confirmed that the water had dropped 50 percent in Sindh, where 400, 000 people are living in relief camps or in tents.
Bhutto-Zardari’s remarks were a sign of hope for hundreds of thousands of farmers who had been uncertain about the sowing of the upcoming wheat crop, which usually starts in October.
Nearly 15 percent of Pakistan’s rice crop and 40 percent of its cotton crop were lost in this year’s flooding, according to officials. The waters wiped out the personal grain stores that many farming families rely on for food year-round.
On Thursday, international aid agency Mercy Corps warned that the approaching cold weather of the winter would pose further threats to disaster-ravaged areas of the country, even as the floodwaters recede. In a statement, Farah Naureen, the agency’s country director for Pakistan, said there was an urgent need for winterized tents and other items for survivors.
The record-breaking flooding, blamed in part on climate change, affected 33 million people, killed nearly 1,700, damaged more than 2 million homes and overall wreaked damage estimated at $30 billion.
Bhutto-Zardari said Pakistan alone cannot handle the devastation caused by climate change.
“We are thankful to the world community for helping us but we need more assistance,” he told reporters in Karachi, the capital of his Sindh province, where 760 people died in floods and 350 survivors later lost life due to the outbreak of diseases.
The latest remarks of Bhutto-Zardari also came two days after the United Nations — amid a surge in diseases in flood-hit areas of Pakistan — raised its aid appeal for Pakistan to $816 million from $160 million, saying recent assessments pointed to the urgent need for long-term help lasting into next year.
Bhutto-Zardari said Pakistan has witnessed its worst-ever flooding because of climate change since June, although his country contributes less than 1 percent of global greenhouse gas emissions. August rainfall in the Sindh and southwestern Baluchistan provinces was eight and nearly seven times normal amounts, while Pakistan as a whole this summer had three-and-a-half times its normal rainfall.
Bhutto-Zardari criticized former Prime Minister Imran Khan for continuing anti-government rallies even during floods. “I cannot hold such rallies when my people are dying in the floods,” he said.
Khan was ousted from power in April through no-confidence in the parliament.
But he says he was ousted under a US plot, a charge Washington denies.
Bhutto-Zardari said Khan during his tenure strained Pakistan’s ties with many countries, including Washington.
His remarks came after Khan vowed to march on Islamabad soon to force Prime Minister Shahbaz Sharif to hold snap elections which are due next year.
Bhutto-Zardari said Pakistan cannot afford to go to the elections when many areas are still submerged. He said Pakistan will first accomplish the task of helping people rebuild homes in flood-hit areas and return to their normal life.
“Elections will be held next year,” he said, amid threats from Khan for a march on Islamabad.

Moody’s downgrades Pakistan’s credit rating over liquidity, external vulnerability risks

Updated 06 October 2022

Moody’s downgrades Pakistan’s credit rating over liquidity, external vulnerability risks

  • Caa1 rating reflects Pakistan highly reliant on multilateral partners for financing — Moody’s
  • Pakistan says Moody’s rating ‘not truly reflective’ of macroeconomic conditions

ISLAMABAD: International credit rating agency Moody's cut Pakistan's sovereign credit rating on Thursday by one notch to Caa1 from B3, citing increased government liquidity, external vulnerability risks and higher debt sustainability risks as the main reasons.  

The rating agency's outlook on Pakistan remained unchanged at negative. In a statement, Moody’s said floods have exacerbated Pakistan's liquidity and external credit weaknesses. It added that the natural calamity has also vastly increased the country’s social spending needs, while government revenue is “severely hit.” 

“Debt affordability, a long-standing credit weakness for Pakistan, will remain extremely weak for the foreseeable future,” it added.  

Moody’s further said the Caa1 rating reflects Pakistan would remain “highly reliant” on financing from multilateral partners and other official sector creditors to meet its debt payments.

The rating agency also lowered Pakistan's real GDP growth to 0-1% for the fiscal year 2023 (the year ending June 2023) from a pre-flood estimate of 3-4%. 

"The floods will affect all sectors, with the impact likely more acute in the agriculture sector, which makes up about one-quarter of the economy," it said. "As the economy recovers from the floods, Moody's expects growth to pick up next year but stay below trend."

Pakistan’s finance ministry reacted sharply to Moody’s updated rating, saying it was done unilaterally without prior consultations and meetings with Pakistan’s finance team and the State Bank of Pakistan (SBP) officials.  

“After a regular stock take of the economic and fiscal conditions, the Ministry of Finance seeks to inform that government policies over the last few months have helped in fiscal consolidation,” the finance ministry said in a statement.  

It said Pakistan has adequate liquidity and financing arrangements to meet its external liabilities, adding that the South Asian country has secured the International Monetary Fund’s (IMF) programme.  

“The [IMF programme’s] continuity is based on the confirmation and confidence in the country’s ability to maintain the fiscal discipline, debt sustainability and its ability to discharge all its domestic and external liabilities,” the ministry said.  

The finance ministry concluded by saying that it feels the downgrading of Pakistan’s rating is “not truly reflective of Pakistan’s macroeconomic conditions.”

Audio leaks controversy: Pakistani PM accuses predecessor Imran Khan of treason

Updated 06 October 2022

Audio leaks controversy: Pakistani PM accuses predecessor Imran Khan of treason

  • Imran Khan inflicted ‘irreparable damage’ on Pakistan’s reputation, PM says
  • PM Shehbaz Sharif says audio leaks prove Khan committed 'real conspiracy'

ISLAMABAD: Prime Minister Shehbaz Sharif on Thursday accused his predecessor Imran Khan of committing treason by peddling the “foreign conspiracy” theory after his ouster from office in April, denying allegations his government had any hand in the recent audio leaks that have whipped up a political storm in the country.   

Khan has used a diplomatic cypher as the basis to accuse his political opponents of being part of a Washington-backed conspiracy to oust him from power. PM Sharif, his coalition government and the US have rejected Khan’s accusations.  

The matter once again became a topic of public debate after the emergence of another purported audio clip online last Friday. In the clip, Khan, his then principal secretary Azam Khan and two top aides, Shah Mahmood Qureshi and Asad Umar could purportedly be heard strategizing the "foreign conspiracy." 

“He [Khan] has committed treason against the people of Pakistan and has inflicted irreparable damage to Pakistan’s reputation and standing among the comity of nations,” Sharif said in a news conference in Islamabad.  

The government has constituted a high-powered panel to probe the recent audio leaks from the PM Office and has termed it a breach of national security.  

Sharif recalled the events of April 3, when the then opposition tabled a vote of no-confidence against Khan. The deputy speaker then, Qasim Suri, had dismissed the motion on the basis of the cypher.  

Khan subsequently dissolved the assembly, a summary of which was approved by President Arif Alvi within 20 minutes.  

“This was the foundation of the conspiracy,” he said, adding that Khan wasted the nation’s time for the next five months with his “foreign conspiracy” allegations.  

He accused Khan of confusing voters and referring to the US, said the former premier had “damaged Pakistan’s relations with the world’s biggest power.” 

 “Today all the links of that conspiracy stand connected to Imran Khan and there is solid evidence of it,” Sharif said.  

Sharif described Khan’s campaign against the government as “the worst dishonesty” and  accused his predecessor of playing with the country’s interests. 

“Is there any doubt left after that [audio leak] as to who committed the real conspiracy,” he asked, adding that his government was trying to repair Pakistan’s damaged relations with the US.  

“This is not less than any treason against the nation,” he said. “The whole nation has seen the faces of the conspirators.”  

PM Sharif said no one would place their trust in the Prime Minister’s Office after the emergence of the audio leaks. He added that “these audio leaks have rendered an irreparable loss to the nation and compensation for this loss was not easy.”  

“Thank God, Allah has vindicated us all,” he said, denying the government had any hand in leaking the clips. “He [Khan] is a fraudster who isolated the nation, attacked the armed forces by calling them neutral and chowkidar [gatekeeper],” the prime minister added.  

He recalled the invaluable services rendered by the armed forces in Pakistan’s war against militancy.  

Sharif said the cabinet had approved an investigation into the audio leaks. He said the nation would be apprised of the results of the probe.  

“This person [Khan] if imposed again on this country, will destroy Pakistan and its institutions,” he said. “He is the biggest threat, he will defame Pakistan.”  

Sharif said a cypher received from foreign missions cannot be decoded. “If it is, then all the cables from all embassies can be leaked or stolen,” he said, reiterating that the controversial cypher’s copy was still missing from the Prime Minister’s Office.  

“His [Khan’s] audio leaks have proven that there were four people behind the so-called conspiracy,” Sharif said. “What other evidence do you need?”  

On the army chief’s appointment, the prime minister said it would be done constitutionally. Pakistan’s current army chief, General Qamar Javed Bajwa, is set to retire in November this year after six years in office.  

“It has a process in the law and the constitution, and it will be followed,” he said. “You need not worry about it.”  

Pakistani president denies brokering political ‘deal’ in veiled reference to ex-PM Khan, army

Updated 06 October 2022

Pakistani president denies brokering political ‘deal’ in veiled reference to ex-PM Khan, army

  • Widespread reports in local media said president arranged meeting between ex-PM, top military officials
  • Separately, in address to joint sitting of parliament, Alvi calls upon political parties to end “polarization”

ISLAMABAD: Pakistani President Arif Alvi on Thursday denied “brokering” a deal with sparing political factions, in a veiled reference to ex-PM Imran Khan and top military officials, saying he had always tried to “bring people closer” in his own capacity, state-run Associated Press of Pakistan (APP) reported.

Widespread reports in local media have recently said the president had arranged a meeting between Khan and top army officials, including army chief General Qamar Javed Bajwa.  

Neither has confirmed the meeting. 

In an interview last week, Khan responded to the reports of the meeting by saying he “did not want to lie and cannot tell the truth.” 

“I am not a broker. I only make efforts to bring people closer,” Alvi was quoted as saying by the APP during an interactive session with journalists at the Presidential Palace.

When asked whether he had played a role in mending fences between top government officials and Khan, Alvi said: “Even in conflict within a family, people contribute on their part to sort things out. This is never an easy job.” 

Separately, in an address to a joint sitting of the parliament today, Thursday, Alvi called upon political parties in Pakistan to end “polarization” in the country and set a date for fresh general elections in the country.  

“This is the year of election and if there is polarization, we must resolve it,” he said. “We have an entire year. If the difference [over election date] pertains to only a few months, then after talking to each other and satisfying one another, you can decide a date for elections,” the president added.  

Reiterating his stance, Alvi urged parliament to end polarization “for God’s sake.” 

“Without letting go of rigidity, polarization can never come to an end,” he added.  

Ousted in a parliamentary vote of confidence in April, former PM Khan has accused Washington of backing a campaign to oust him from office and blamed the incumbent government for being part of the “foreign conspiracy.” He has demanded early elections in Pakistan.  

Washington and PM Sharif have both denied the allegations. Khan has threatened to launch a long march to Pakistan’s capital, Islamabad, and force the government to announce an early date for general elections.  

Sharif has rejected Khan’s demands and vowed elections will be held as per schedule next year. His government has warned Khan against marching to the capital, threatening to take stern action against him and his supporters.

After floods, Pakistan economy to grow by 2%, 9 million could be pushed into poverty

Updated 06 October 2022

After floods, Pakistan economy to grow by 2%, 9 million could be pushed into poverty

  • Latest assessment is part of World Bank’s October 2022 Pakistan Development Update
  • World Bank director for Pakistan says more important than ever to carefully target relief to the poor

KARACHI: Pakistan’s economy is expected to grow by only two percent in the current fiscal year ending June 2023, the World Bank said on Thursday, with the slower growth reflecting, among other factors, damages by recent floods that have killed over 1,700 million and caused at least $30 billion in economic losses to the cash-strapped South Asian nation.

The latest assessment of the Pakistani economy was part of the World Bank’s October 2022 Pakistan Development Update: Inflation and the Poor.

“The slower growth will reflect damages and disruptions caused by catastrophic floods, a tight monetary stance, high inflation, and a less conducive global environment,” the bank said in a statement. “Recovery will be gradual, with real GDP growth projected to reach 3.2 percent in fiscal year 2024.”

The World Bank said poverty in the hardest-hit regions would likely worsen due to the recent flooding.

“Preliminary estimates suggest that – without decisive relief and recovery efforts to help the poor – the national poverty rate may increase by 2.5 to 4 percentage points, pushing between 5.8 and 9 million people into poverty,” the statement said.

“Macroeconomic risks also remain high as Pakistan faces challenges associated with a large current account deficit, high public debt, and lower demand from its traditional export markets amid subdued global growth.”

Najy Benhassine, the World Bank’s country director for Pakistan, said the floods were expected to have a "substantial negative impact" on Pakistan’s economy and on the poor, mostly through the disruption of agricultural production.

“The government must strike a balance in meeting extensive relief and recovery needs, while staying on track with overdue macroeconomic reforms. It will be more important than ever to carefully target relief to the poor, constrain the fiscal deficit within sustainable limits, maintain a tight monetary policy stance, ensure continued exchange rate flexibility, and make progress on critical structural reforms, especially those in the energy sector.”

The update also outlined potential strategies to manage the impacts of high inflation. Inflation in Pakistan is expected to reach around 23 percent in fiscal year 2023, reflecting flood-related disruptions to the supply of food and other goods, higher energy prices, and difficult external conditions, including tighter global monetary conditions. The high inflation will disproportionately impact the poor, the bank said.

“While relief measures are needed to cushion the impacts of flooding, it will be critical to ensure that these are targeted towards those most in need,” said Derek H. C. Chen, the author of the report.

“Pakistan has previously resorted to energy subsidies, but our analysis shows that such measures disproportionately benefit better-off households, while imposing unsustainable fiscal costs. Going forward, the priority should be to tame inflation through sound macroeconomic policies. These should be accompanied by measures to provide targeted relief to those hit hardest by rising prices, including through expanded social protection programs, and to address the distortions that discourage trade and productivity.”