We Were At The Q&A Session With Asad Umar & This Is What He Had To Say About Pakistan’s Economic Situation

Federal Minister for Finance, Asad Umar met with the representatives of all the major digital media publishers in Pakistan on Wednesday evening.

At this first of its kind formal interaction between a federal minister and the country’s growing digital media industry, Umar was at his candid best. From providing in-depth answers to hard-hitting questions about the rising dollar rate and fuel prices to pledging increased investment in education, the Finance Minister took the opportunity to put his government’s priorities and economic strategy on the table.

Read: #EconomicsForDummies: 5 Key Points From Asad Umar’s Mini Budget 2019 Simplified

While you can watch the entire discussion from the video link above, we have summarized the seven most important discussion points from yesterday’s Q&A session with Asad Umar.

The Elephant in the Room: The Ever-Rising Fuel Prices

As expected the very first question asked from the Finance Minister was about the sharp – and constant – increase in fuel prices.

Defending the government’s position vis-a-vis the recent hike in fuel prices, Umar stated, “The share of tax on fuel prices was 92% when we took over. At this point, taxes make-up only 30% of the current fuel prices. So, it needs to be understood that we have brought down the rate of taxes on fuel from 92 percent to only 30 percent.”

The increase in the prices, he explained was the discretion of Oil & Gas Regulatory Authority (OGRA) and not the Ministry of Finance.

The Tax Amnesty Controversy

Asad Umar had been one of the most vocal critics of tax amnesty schemes in the past. However, there has been increasing conjecture in recent days signaling that PTI too would be introducing a tax amnesty scheme for various categories of tax evaders.

The minister acknowledged that the subject of tax amnesty was controversial. He however clarified that during his time in the opposition he had not opposed amnesty schemes as a whole but had reservations regarding the way they were executed.

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“If the tax amnesty scheme is such that it does not increase the tax payers’ net – as was the case previously – there is no point of giving an amnesty. The argument of the past governments was always that once an amnesty is given, more people would enter the system and tax collection would eventually increase; but this never happened. Secondly, giving amnesty at a very low rate is a moral hazard.”

While a final decision has not yet been taken on this issue and discussions are underway, Asad Umar shared that if such a scheme were initiated under the current government it would ensure that those who received relief would not slip-out of the tax net after receiving amnesty.

Any Relief for the Common Citizens in the Near Future?

Once again, acknowledging the concerns of the common citizens, Asad Umar stated, “The masses are facing financial hardship right now owing to two factors: one, there is of course inflation and two, the pace of the overall economy has slackened. But there is a need to understand why the economy is the way it is right now.”

He linked his answer to the balance of payment crises that he said had been inherited by PTI from the PML-N government.

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He explained that only in the realm of electricity and power, the country was facing a deficit of Rs. 600 billion. “In simple terms, if you’re selling electricity at the cost of Rs. 100 but receiving only Rs. 60 in return, the deficit has to be bridged to meet the power needs of the country. For the deficit to be bridged the power tariffs have to be increased and an increase in tariffs inevitably leads to a rise in inflation.”

What is the Government’s Plan to Tackle Rising Unemployment?

The Finance Minister once again provided a detailed answer to this questions. He asserted, “While the economy is comparatively slow right now and the thumb rule is that two million jobs annually cannot be created unless the economy grows at a rate of 7 percent.”

He however quoted past precedents to highlight that there had been a rise in employment during years of slow economic growth and a fall in employment during times when economic growth was high. “It’s about how a government prioritizes. For us job creation is a high priority and we are focusing our support on those industries and initiatives that are job-intensive.”

What is the Government Doing to Control the Exuberant Increase in the Prices of Medicines?

Admitting that the prices of medicines had sharply increased in the last few months, Asad Umar explained, “The prices of medicines in Pakistan were fixed at such low rates that companies were being forced to shut down their operations in the country. This was not acceptable. But then of course, such a sudden and sharp increase in the prices of medicines is also not acceptable. We have a meeting of the ECC (Economic Coordination Committee) on Monday and a decision to tackle this issue will be taken soon.”

Is Pakistan About to Become Oil-Rich?

Ever since Prime Minister Imran Khan hinted at a possible oil find in Pakistan, people have been waiting with held breath for the government to share whether or not the country is about to become oil-rich in the near future.

Umar shared, “Deep off-shore drilling (5000 meters below sea level) is currently underway. Last I checked, they had drilled up to 3500 meters below sea level. Once they reach 5000 meters, we will only then know if there is a find and its magnitude.”

Sounding hopeful, he further elaborated, “We are expecting for the potential find to be big. This is a high risk operation and it’s very expensive. However, no company – especially a giant like Exxon Mobil – invests only when the potential find is likely to be huge.”

Will the Long Standing Demand to Increase the Education Budget Materialize?

There are no two opinions about the fact that for Pakistan to truly rise as a prosperous and developed nation, education has to be made a national priority.

Expressing his resolve to greater investment in education, Asad Umar gave the example of a recent study that showed that the highest return on investment in Pakistan – more than any other sector – was witnessed in education. “We should absolutely invest more in education,” he asserted.