Finance Minister Ishaq Dar on Tuesday categorically rejected the notion that the foreign exchange reserves had increased due to borrowing from the International Monetary Fund (IMF).
“The government is using majority of the funding of IMF for returning the debt back to it, which were received during the previous government’s regime,” Dar said while addressing a seminar on “Various circle of economic development and national cohesion”.
The seminar was jointly organised by the Embassy of Korea and Institute for Policy Reforms (IRP).
He rejected the notion of heavy cost of borrowing of the government, saying that it was a mixed transaction and the average cost of the total government borrowing during 2 years was 3.6%. “We must have to show our presence in the international market in order to attract foreign direct investment (FDI),” he added.
The minister said the country’s forex reserves of over $20 billion would definitely give confidence to the foreign investors as the FDI was directly related to high forex reserves besides other factors including good governance and improved law and order situation.
He informed that improvements in Pakistan’s economy were manifested by an overall improvement in macroeconomic indicators. “In FY14, Pakistan achieved, as mentioned above, GDP growth of 4.02%- the highest in six years – and increased it further to 4.24% in FY15, reaching the highest level in seven years,” he added.
He maintained that the fiscal deficit, which stood at 8.8% when the government took office at the end of FY13, has been brought down to 5.3% in FY15, adding that there has also been a significant increase in Pakistan’s foreign exchange reserves in the past 18 months. He said positive macroeconomic performance had resulted in a soaring stock market and increased investment, adding that the government would be able to overcome the energy crisis by early 2018, adding 10,600 Megawatt more electricity to the national grid. “Currently, we are facing a shortfall of about 5,000MW of electricity, whereas energy projects of 24,000MW are under process and some of them will start generating 10,600MW by the end of 2017 or early 2018,” he said.
The remaining projects of 14,000MW, he said, would start adding electricity to the system after 2020, which proves that the government was not working on the projects confined to its tenure only. The minister said two mega hydropower projects, Dasu and Diamir-Bhasha dams, were also in progress, which would not only help overcome the energy crisis but also store water for irrigation purposes. “Diamir-Bhasha Dam will have the capacity of 1.3 trillion cubic feet water which,” he added.
Ishaq Dar said the government was also working on civil nuclear energy projects, which would add 1,000MW more electricity to the system in next seven years. He also expressed his gratitude to the government and people of the Republic of Korea for their continued and longstanding economic support that is contributing greatly in Pakistan’s economic development.
“As you may already know, the 2015-2017 Economic Development Cooperation Fund Framework Agreement, amounting to $500 million, was signed on 2 October 2015 in Islamabad. Under the framework arrangement, various projects in hydropower, road infrastructure, agriculture, improvement of power distribution system, information technology and health sector will be completed,” he added.
He said in addition to financing from Korea, Pakistan also benefits from Korean knowledge and experience. “Pakistan and Korea have helped each other a lot over the years and I think that the best way we can help each other in the future is by sharing knowledge and experiences,” he added.
Korean Ambassador Dr Song Jong-hwan said Pakistan was rapidly growing and in future it would become a good economic power with 200 million population.
He said South Korea was fully prepared in helping Pakistan in different sectors, adding that currently, Korea was providing 300 scholarships annually to Pakistani students.