- Govt to introduce ‘radical’ tax reform
Prime Minister Shahid Khaqan Abbasi said in an interview with Bloomberg late Saturday that he will not opt to devalue the rupee to spur inflows.
The statement comes amidst stoking speculation that the prime minister will opt to devalue the rupee as twin deficits are depleting the nation’s foreign-exchange reserves and constraining credit ratings.
The prime minister said that with elections scheduled to be held next year, the government is instead looking to curb imports through tariffs and help boost local production.
Abbasi said in the interview at the former house of Pakistan’s founder Muhammad Ali Jinnah in Karachi that “devaluation is our option, theoretically, even though it should incentivise exports but in reality, it doesn’t.”
“So at this moment as I said devaluation is not on the table,” he added.
Pakistan’s current account gap more than doubled to $12.1 billion in the year ended June, while its trade deficit surged to a record $33 billion as imports increased.
The reserves have fallen by a quarter to $14.3 billion since reaching a peak in October, while the rupee has remained stable. As a share of the economy, the nation’s 2.9 per cent projected current account gap compares with 1.5 per cent in India and 1.9 per cent in Indonesia, according to International Monetary Fund estimates.
Many factors, including political turmoil, twin deficits, and falling reserves, had led experts to believe that the government would mark down its currency, giving investors another reason to stay away from the world’s newest emerging market.
Abbasi said that his government will focus on cutting “unnecessary” imports.
Abbasi expects economic growth will meet the government’s 6 per cent target for the year ending June because of Chinese investment in the nation. China is financing power plants and infrastructure projects valued at more than $50 billion as part of Chinese President Xi Jinping’s “One Belt One Road” push. It will help end energy outages before elections.
Abbasi also said that disqualification of Nawaz Sharif as prime minister did hurt business in the country but assured that the projects will continue as planned.
The prime minister also said that the government won’t take loans from IMF and might introduce ‘radical’ tax reform.
It is pertinent that economy is not affected by current political turmoil in the country, said the prime minister.
“It’s election year. It’s a polarized situation. It’s a very charged atmosphere,” Abbasi concluded.