Karachi: Finance Minister Ishaq Dar Wednesday assured investors at the Pakistan Stock Exchange (PSX) that Pakistan will not default, adding that despite serious problems, the country “will not approach Paris Club”.
Addressing virtually a ceremony to mark the first listing of the developmental Real Estate Investment Trust (REIT) on PSX, Ishaq Dar admitted that the country is indeed in a tight [fiscal] position because “we do not have $24 billion in reserves which [the PML-N government] left in 2016”.
“But that is not my fault. The fault is in the system and we must ensure that everyone works together for Pakistan’s progress,” he said.
Assuring the investors that Pakistan will never default, Ishaq Dar said: “It’s been three months since I took charge and we listen every day that there is going to be a default. How will there be a default? There is no chance that Pakistan will default.”
To prove his claim, the Finance Minister said that Pakistan’s debt-to-GDP ratio is currently 72%, while it was 62% when he left the charge in his last stint.
He also gave examples of other countries saying that the US’s debt-to-GDP ratio is 110%, Japan’s is 257%, and UK’s after COVID debt-to-GDP ratio is 101%.
“I can give you data of dozens of developed countries who are above 100% but I don’t see an alarm there all the time that we are under the debt trap or difficulty. Unfortunately, we are our own worst enemy,” said the finance minister.
Exchange rate gap
On the matter of the gigantic gap in the exchange rate, Dar said there were three primary reasons for the worsening situation — the smuggling of the greenback to a neighboring country, the import of wheat and its partial subsidization, and the import of fertilizers, which was heavily subsidized.
He said that when he boarded the flight to Pakistan to assume the finance ministry, markets had “started behaving positively”.
However, he assured that he had asked the law enforcement agencies to ensure that the smuggling of all three items was stopped, saying that the economy also needed to be defended in the same way the territory was.