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27 May, 2023

Rebuttal - Atif Mian, a well-respected economist, has criticized Pakistan’s economic policy terming it ‘non-sensical’

Atif Mian, a well-respected economist, has criticized Pakistan’s economic policy terming it ‘non-sensical’. While comparing the experience of Ghana and Sri Lanka, he has concluded that Pakistan should “take decisive actions, aggressively restructure and take courageous actions”. This is a veiled suggestion to declare default. This is a misplaced criticism made from a purely theoretical point of view. The gentleman has no idea how the practical economics operates in practice. His comparison with Ghana and Sri Lanka, is also misplaced given the incomparably small size of their economies and populations relative to Pakistan.

Fundamentally, he didn’t care to analyze the structure of Pakistan’s debt which has less than 10% share in commercial bonds/sukuks, with the next maturity falling due in April 2024. The rest of the debt is owed to the multilateral and bilateral creditors. Both these classes of creditors are engaged with Pakistan and none has assessed that Pakistan should default.

The author has completely ignored the deep-rooted reforms Pakistan has undertaken in the last 9 months. These included market exchange rate, interest rate adjustments, mid-year taxation to improve fiscal position, imposition of levy on petroleum products and non-monetization of fiscal deficit. All these actions were undertaken under an IMF program which was unprecedented as never in country’s history such front-loaded conditionality was imposed. However, we accomplished it through heroic efforts. It is unfortunate that despite such actions, the staff level agreement (SLA) has still not been reached delaying the release of 9th review tranche. The country is surviving economically and would continue to survive. What Pakistan has done is decisive and courageous; we would continue to walk the road to reforms to stabilize our economy and, in course of time, to steer it toward the path of sustainable growth.

The comparison of nominal exchange rate is also unwarranted. Pakistan’s real exchange rate is currently estimated to be 15% undervalued. The nominal rate is the result of speculation, market manipulation and general distraught from political instability. The undervalued exchange rate is reflective of the fact that underlying fundamentals are improving. Pakistan has historically sold petroleum products at significantly lower prices than regional countries. With petroleum levy of Rs.50 achieved, this doesn’t involve any subsidy from the government. It would be unwise to levy additional tax on consumers on top of prices that have doubled in less than a year, especially when they are facing rising inflation. The author has cited this as an example of non-sensical policies. This is simply a misplaced example.

Pakistan economy has suffered because of international shocks of COVID, Ukraine War and devastating floods of last summer. The challenges that resulted from an overly heated economy, bequeathed to us in April 2022, and the breach of IMF conditionality on the eve of departure of PTI government, have been overcome by the present government. The current account deficit, the primary indicator of balance of payments imbalance has firmly been brought down from a high of $17.5 billion to around $3.2 billion. This achievement is a reflection of bringing the economy to within its latent strengths and not on borrowed resources.

The author is also oblivious to unprecedented political challenges faced by the country. We are not living in calm and serene times. The present situation has major repercussions for the economy. With political stability likely to emerge soon, there would be a major economic turnaround.


20 May, 2023

Calarifiaction - Signing of the IMF’s agreement

Certain sections of the national press have reported that the delay in signing of the IMF’s agreement because the IMF wants assurance from the Ministry of Finance that the funds will not be utilized for political purpose.

It is clarified that this news is false and unfounded as IMF has never raised any such concern with the Government nor any funds can be utilized for any purpose without the approval of the Parliament through the budget.


20 April, 2023

Rebuttal - SBP rebuts Dawn News article: "In breach of law, govt borrows Rs239bn from State Bank: think tank"

SBP rebuts Dawn News article: “In breach of law, govt borrows Rs239bn from State Bank: think tank”

Apropos to the story titled “In breach of law, govt borrows Rs239bn from State Bank: think tank”, State Bank of Pakistan categorically rejects the content of the article. It is also regrettable that prior to the filing of this story, the reporter did not bother to contact SBP for verification of the data. SBP further reiterates that no breach of Section 9-C of the SBP Act of 1956 has taken place, as asserted by the reporter.

Apparently, the said story is based on a research report by an Islamabad-based economic think tank, Prime Institute (PI) which prima facie has relied on the data titled “Credit/ Loans Classified by Borrowers”, on the SBP website. However, this data appears to have been misconstrued by the think tank. Ironically, the reporter relied on an unpublished research report, while failing to corroborate its assertions.

It is clarified that data in the aforesaid table is calculated on accrual basis which takes into account accretion of interest over time and impact of exchange rate fluctuation in case of on-lending of Special Drawing Rights (SDR) Allocation, received by the Government of Pakistan as a member of the International Monetary Fund (IMF). Furthermore, gross amount of lending is netted-off against the government deposits with the SBP. Based on these reporting principles, the increase of net SBP credit of Rs. 239 billion to the government sector is attributable to constituent elements namely; accrual of interest (Rs. 110 billion), impact of exchange rate revaluation (Rs. 84 billion) and decrease in government deposits with SBP (Rs. 45 billion). Needless to mention, SBP has not extended any fresh loan to the government since the promulgation of SBP Amendment Act, 2022.

It is further clarified that since the discontinuation of borrowing from the State Bank of Pakistan, the government has repaid SBP debt of Rs. 2,017 billion. It is hoped that in future, the newspaper would contact SBP prior to the publication of news related to the central bank and its subsidiary organizations.

10 April, 2023


Reference news item circulating on media channels that Secretary Finance Mr. Hamed Yaqoob Sheikh has gone the USA on leave. It is clarified that the Secretary Finance has gone to the USA to attend spring meetings of the IMF and the World Bank and to represent the Finance Minister.

20 March, 2023

Finance Minister Senator Mohammad Ishaq Dar’s statement on the Floor of the Senate of Pakistan on Pakistan Nuclear Program

My statement on the floor of the Senate of Pakistan on 16th March, 2023, in response to a query regarding reasons for delay in IMF Program, is being quoted out of context.

My comments with regards to Pakistan’s Nuclear Program was in response to a colleague Senator’s specific question, wherein, I emphasized that Pakistan has sovereign right to develop its nuclear program, as it best suits our national interests, without any external dictation, which, by no means should in any way whatsoever be linked with the ongoing negotiations with the IMF.

It is clarified that neither IMF nor any other country has attached any conditionality or made any demand from Pakistan with regard to our nuclear capability and the delay in IMF staff level agreement is purely due to technical reasons, for which we are continuously engaged with the IMF in order to conclude it at the earliest.

25 February, 2023

Rebuttal - Rumours that Government has instructed to stop payment of Pay, Pension, etc

There are rumours floating around that Government has instructed to stop payment of pay, pension, etc. This is completely false as no such instructions have been given by Finance Division, which is the concerned federal ministry. AGPR has confirmed that pay and pension have already been processed and will be paid on time. Further, other payments are being processed as per routine.

14 December, 2022

Clarification - Response on News Item Published in "Express Tribune" regarding TSA

A news story has been published in the national newspaper (The Express Tribune) on 10-12-2022 with the title "TSA deadline will be missed: IMF". The story has been based on a draft report prepared by the IMF Technical Assistance Mission which visited Islamabad from October 3rd to 10th 2022.The news story contains incorrect data, wrong and baseless information and mis-interpretation of the facts and records.

It is clarified that Finance Division with the technical support of the International Development Partners including IMF has undertaken significant structural reforms in the field of the public financial management in the Federal Government. Implementation of Treasury Single Account (TSA) is one of such reform areas where the IMF has been providing comprehensive Technical Assistance for capacity building, design, scope and execution in line with the International Best Practices. It is also highlighted that the subject newspaper story is based on an IMF report which is still at the draft stage and discussions are in progress between Finance Division and the IMF. The IMF draft report has acknowledged major strides made by Government of Pakistan in implementation of challenging public financial management reforms including TSA. This aspect has been conveniently ignored in the news story.

Owing to the complexities involved in the implementation process, the IMF team has proposed various models and timelines for TSA. Finance Division is in the process of evaluating these proposed models and timelines in consultation with all stakeholders.

While the Government has agreed with the IMF to implement TSA, there is no end-December 2022 deadline to close all commercial bank accounts maintained by public sector entities and Ministry of Defence and transfer money to the State Bank of Pakistan. Further, no commitment has ever been by Government of Pakistan with IMF to close all commercial bank accounts maintained by the Public Sector Entities including OGRA and NHA. The figure of cumulative balance of about Rs. 2.9 trillion is also incorrect.

The statement that “Ministry of Finance is un-aware of the ownership of 484 bank accounts” is also in-correct and tantamount to dis-information. Complete information is available with the State Bank of Pakistan with regard to all the commercial bank accounts maintained by the federal as well as provincial government entities/organizations. The commercial banks have been sharing full data with the SBP as per the provisions of the PFM Act, 2019.

The implementation of TSA in all the Public Entities of the Federal Government is an ongoing process involving extensive consultations on scope, design, accounting, banking arrangements and IT infrastructure. It has not been slowed down as alleged in the news story.

06 December, 2022

Rebuttal - A false message on supposed economic emergency proposals has been circulating on the social media

A false message on supposed economic emergency proposals has been circulating on the social media in recent days.

Finance Division not only strongly rebuts the assertions made in the said message but also categorically denies it and that there is no planning to impose economic emergency. The message is unfortunately aimed at creating uncertainty about the economic situation in the country and can only spread by those who donot want to see Pakistan prosper.

Creation and spread of such false messages is against national interest in these times of economic hardship. A mere reading of the nine points mentioned in the message indicates how far-fetched those suggestions are. It is also quite inappropriate to equate Pakistan with Sri Lanka, given inherent strength and diversity in Pakistan’s economy.

The present difficult economic situation is mainly the result of exogenous factors like commodity super-cycle, Russia-Ukraine war, global recession, trade headwinds, Fed’s increase in policy rates and devastation wreaked by unprecedented floods.

The Government has been making utmost efforts to minimize the impact of such external factors, even when faced with the economic consequences of unprecedented floods and having to meet IMF conditionalities. The Government remains committed to completing the IMF program while meeting all external debt repayments on time.

In this challenging economic situation, the Government has put in place a number of austerity measures with the approval of the Federal Cabinet. Such measures are in public knowledge and are aimed at eliminating non-essential expenditures. Similarly, the Government has been deliberating energy conservation mainly aimed at reducing the import bill. Such deliberations will continue in the Cabinet and all decisions will be taken in consultation will all stakeholders and in the best national interest.

With the efforts of the current government, the IMF program has come back on track and negotiations leading to 9th Review are now at an advanced stage. Government’s recent efforts have resulted, amongst others, in lower current account deficits in recent months and achievement of FBR revenue targets. Easing up of pressure on external account is also foreseen in the near future. While there remains the need to make structural adjustments in the mid-term, the economic situation of the country is now moving towards stability.

Finance Division urges the people of Pakistan to contribute towards economic betterment and stability and not to pay heed to malicious rumors mongering which is against the national interest of Pakistan.

25 September, 2022

Clarification - Article titled "Financial emergency" by Dr Farrukh Saleem published in daily "THE NEWS" exaggerates the economic challenges facing the country

The article titled “Financial emergency” by Dr Farrukh Saleem published in daily “THE NEWS” today exaggerates the economic challenges facing the country while downplaying its economic strengths. The author has made use of selected data of various economic indicators to fit his views and opinions.

 In particular, the article presents a less-informed, lopsided and over exaggerated picture of external sector challenges, while ignoring that many emerging market economies are also facing similar challenges. Globally, increase in commodity prices and a strengthened US dollar has increased pressures on external sector, which the author has not alluded to in his opinion.

 The author has conveniently used a mix of latest and slightly old data to make his points.  For instance, the latest SBP’s foreign exchange reserve numbers ($8.3 bn) are mentioned followed by mentioning of import numbers in a causal manner. The deceleration in imports in the recent months has been completely disregarded.

 Similarly, current account deficit number of $17 bn (for FY22) is used to highlight the need for financial flows without mentioning that the same for FY23 is projected at around $9-10 bn by both domestic analysts as well as IFIs, something which would reduce gross financial requirement by over $7 bn.

 The article also presents only the outflow side of the external accounts (import payments, debt obligations etc.) while conveniently ignoring altogether, the upbeat exports growth, strong remittance inflows, foreign investments, and inflows anticipated in FY23. It is to be noted that Pakistan’s exports and foreign remittances are in excess of $ 60 bn per annum.

 Pakistan has successfully completed 7th and 8th review of the IMF’s Extended Fund Facility in early September 2022. This signifies confidence in the government’s resolve and policy initiatives to combat the external sector challenges. Foreign exchange inflows anticipated later in FY23 in accordance with the IMF program, moderation in significant export and remittance inflows will soon subside the external sector pressures.

 The government is confident that Pakistan is in a position to not only meet its financing requirements but also rebuild its forex reserves to more than 2 months of imports over the next few months.

 Finally, the government is also committed to follow a strict fiscal discipline and the fiscal deficit for FY23 is also projected to remain below Rs 5 trillion even in the aftermath of economic challenges posed by the devastating floods. The articles tries to create an unwarranted alarm by claiming that the fiscal deficit will be Rs 6 trillion.


28 April, 2022

Clarification - News circulating on social media that Government has borrowed from State Bank of Pakistan (SBP)

A news is circulating on social media whereby an impression is being created that Government has borrowed from State Bank of Pakistan (SBP) which is grossly incorrect and depicts the limited understanding of the monetary variables. As reported in the monetary tables (M2), the government’s borrowing from the SBP for budgetary purposes is calculated as the difference between the government’s stock of borrowing from the SBP and its deposits with the SBP. Therefore, net borrowing number may change due to fluctuation in cash balance with SBP and other accounting conventions. This change is not fresh budgetary borrowing by the government from SBP but just a change in government’s cash balance with the SBP.

Government remains committed to complying with its obligations under the amended SBP Act and IMF program conditions. There has been no fresh borrowings by the government from the SBP. In fact the government has been retiring its previous stock of debt with the SBP on its maturity.



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