Former finance minister Miftah Ismail on Tuesday differed with recent statements of his successor, Ishaq Dar, claiming Pakistan is still at risk of default and the government must take steps to prevent this from occurring.
“Pakistan should not default,” he said during an interview with Geo News’ Shahzeb Khanzada. “However, I definitely believe that the path we are on might take us toward default as the economic challenges have increased. We should take steps to avoid the danger,” he said, adding that the default risk would continue so long as Pakistan was unable to secure the next tranche of its bailout with the International Monetary Fund (IMF).
“Pakistan is in jeopardy … it has gone back in jeopardy and as long as IMF is not back on the table, the threat of default will remain high,” he stressed, noting that he did not believe early general elections would sort the looming economic crisis. “[PTI chief Imran] Khan is responsible for pushing Pakistan towards default; he is the one who broke his promise with the IMF; Khan is the one who wanted to derail the IMF program when we tried to revive it under Prime Minister Shehbaz Sharif’s leadership,” he added.
Earlier this month, incumbent finance minister Dar said he would not allow the IMF to “dictate” the government, which Ismail also appeared to differ with. “When the IMF gives you a loan, this means they are helping you out. But saying that the Fund is unreasonable … why did we go to the IMF previously? Dealing with the IMF is not an easy task,” he said, adding that the country’s top priority should be reviving the IMF program through completion of the ninth review.
To a question, Ismail said he had completed arrangements for funding requirements before his departure as finance minister. “Qatar had promised $3 billion; the U.A.E had committed to $2 billion and Saudi Arabia had promised $1 billion,” he said, adding this had been conveyed to the IMF. “Separately, our negotiations were under way with the World Bank and they too gave us a commitment along with ADB [Asian Development Bank],” he said.
However, the former finance minister emphasized, these were all subject to the revival of the IMF program. “If the IMF doesn’t come now, none of this money will come,” he claimed, adding that Pakistan needed to take some “difficult” decisions and increase its tax base by going after traders and businessmen who did not pay their proper share.
Default risks
Earlier this month, the State Bank of Pakistan paid $1 billion for a pending Sukuk bond, averting the risk of immediate default. However, the country has been unable to stem a drastic reduction in its foreign exchange reserves, which have hit a four-year low of $6.7 billion, barely sufficient for a month of import cover.
While admitting that negotiations are ongoing with the IMF, Dar has said that he is working to secure a multibillion-dollar financial support package from Saudi Arabia to help shore up the country’s reserves.