Complete Transcript Of Miftah Ismail Talk In Session Of Atlantic Council.

 Complete Transcript Of Miftah Ismail Talk In Session Of Atlantic Council.

so good afternoon everyone i'm fred kemp i'm president ceo of the atlantic council and minister ismail it is an honor to have you here thank you so much and it's also an honor to have your very impressive delegation uh and the ambassador who we work very closely with and and it's just uh our work with pakistan is long-standing through the through our south asia center so on behalf of the atlantic council we are just delighted to host you for these imf world bank meetings which also happened to be mr minister during your first official trip to washington uh as minister of finance of pakistan since being sworn in earlier this week and so on behalf of the atlantic council and our south asia center run so capably by senior director irfan nuradeen and the geoeconomic center run so capably by josh lipsky and the founding director of our south asia center shuja nawaz is here as well so it's a great to have you here as well shuja we wish you all the best in your new role and thank you for coming to speak with us today in addition uh i want to formally welcome and recognize the honourable ambassador mosud khan of pakistan to the united states who joins us this afternoon as well.

 Thank you for being here you know pakistan and the united states have had a long-standing partnership based on shared values of democratic governance regional security and economic growth today's conversation comes amid significant economic financial and geostrategic challenges in the region i've always felt this bilateral relationship is of outsized importance not just for regional security not just for our own bilateral relations but really for global security as well there has been increased turbulence in the u.s pakistan relationship during the last few weeks and months but it's important for all of us and that's what we're devoted to here at the atlantic council to find ways to deepen ties build trust and explore opportunities for economic cooperation and investment uh between our two countries uh economic uncertainty has grown around the globe of the last few weeks whether it's covet 19 whether it's inflation whether it's the impact of of the war in ukraine and rising oil and commodity prices are creating significant headwinds for many countries including pakistan these challenges however are also at the same time an opportunity to collaborate more closely and reinforce the u.s pakistan relationship across a whole range of sectors including technology and climate change where we spend a lot of our energies at the atlantic council it's also important to recognize that the pakistani american diaspora continues to play a critical role in strengthening bilateral relations between our two countries and the diaspora has played a key role in increased investments from the us and pakistan's booming startup ecosystem we believe that it can play an even more important role in the relationship so we look forward mr minister to hearing your remarks as well as to what should be a compelling discussion thereafter with uh our our geo economic center in pakistan initiative directors josh lipsky and uzar younis so with that mr minister i turn the floor to you thank you.

Miftah Ismail Talkinh At Session Of Atlantic Council.

 uh president kemp uh and uh mr noordin and thank you all the atlantic council for inviting me here and thank you all of you uh for coming here and giving me a chance to interact with you i'll have a very brief remarks and then i guess george and jose will ask me questions and then all of you uh will make comments and ask questions so i'm looking forward to an interactive session i normally do just economics but i think today i'll start with some politics and then then jump into economics i want to start with how the government in pakistan changed recently as you know we had a no confidence motion against the prime minister former prime minister in parliament pakistan has had no confidence motions before in particular uh the pakistan muslim league noon and nawaz sharif led party actually held no confidence motion against venezuela's party people's party when she was prime minister uh but that failed uh and before that i think uh they tried once in the 1950s uh so this was a try we've been trying this for like about uh in the month of october we were talking about this in february or this year uh the people's party leadership and the muslim league leadership got together they announced that they're going to bring in uh no confidence motion uh and uh and and so there was a movement going on uh imran khan the former prime minister uh essentially then started talking about uh uh some quranic verses uh i've just called amber bill marouf and nahiyan al-marker meaning that this is promotion of virtue and prevention of vices somehow that we were the you know standard pairs of wise and he was somehow the stranded pair of virtue that by the way for reference was also a line that taliban used in in in the previous incarnation they had a ministry of that name but we were focused on inflation and we did a movement and social media campaign and a lot of campaigning on on inflation inflation and uh and imran khan going uh and he sort of knew that he's gonna lose but so he did one gambit and he fixed diesel and petrol prices uh motor gasoline prices and diesel prices at a very low level uh at the level let's say about if the if the international oil prices were at 70 dollars a barrel that's where the pakistani you know diesel and petrol prices are and today of course it's it's 110 dollars the government of pakistan is losing a lot of money uh but that was a sort of a if you will a trap set for us uh you know once we came in the government in the event the i mean we tried to do everything to prevent the vote he did not even hold the vote as constitutionally mandated finally the supreme court sort of said that you have to do it and he did it i think the war took place at 11 11 o'clock in the evening and the session of the assembly started at 10 in the morning so it was a very very long day uh finally you know he lost the vote of no confidence and and and left uh the prime minister's office and shahbaz sharif the former chief minister of punjab became the prime minister of pakistan shiva sharif is not the leader of our party he's the president of the party but his older brother nawaz sharif the former prime minister is the leader of our party but shabbat shali is somebody who's governed in punjab the largest province of pakistan for a very long time and has been able to deliver especially in the field of education healthcare and and is generally recognized as somebody who's provided really good governance in in the province of punjab so much so that punjab today has considerably more developed than the other three smaller provinces and that actually causes some fissures in the federation but nonetheless shabashiri's reputation as a doer is solidified in pakistan quite solid in pakistan since imran has left he's thrown a tantrum and he's uh he's on a tour of uh pakistani cities questioning why he's been fired uh that's not the first time a former prime minister prime minister has done that but he's now invented a new conspiracy theory that somehow the americans conspired against getting him out but but hopefully uh that conspiracy theory will die under the weight weight of its own uh implausibility uh but for now i mean you know he's riding a popular wave of uh and and now he's you know going against us uh for inflation and all that i'll come to now through the economics uh one of the things that that that imran did was like i said when he decreased the price of petrol and diesel was to derail an imf program we were in the last year of an imf program normally the imf program lasts for three years and and after belt tightening the first year or in some consolidation the second year in the third year of a program you normally see countries reserves going up foreign exchange reserves going up and some consolidation taking place this is uh completely inverted and pakistan has actually lost a lot of uh foreign exchange reserves just in the last month i think they lost about five we lost about five billion dollars and the imf program has derailed quite a bit uh and and one of the reasons i've come here in fact uh is is to try and set the program back on track that's very important for me as a minister of finance and it's important for our political party that we get pakistan back on an imf program and that helps us with other multilateral institutions and and even the bilateral countries that support us in in our neighborhood from the middle east and china and all that they also want us to get back to an imf program so i'm quite hopeful to do that and uh this morning also i had a very good meetings with the imf and we're working with a lot of countries uh including america in helping us get back on track with the imf and also to get out of this uh fat of gray list this financial election task force that um we've been on this great list now for about close to four years and uh we were given i think 27 actions uh items as they say and i think we've successfully completed 26 then they gave an additional seven items we've successfully completed six of those so some some of these items are uh remain and uh whereas i think that for instance the imf is kind of right to ask us to do a few things to get back on track and and justifiably says that we uh ourselves took actions that got us off track i think that fed up sort of keeps changing goal post a little bit here uh more than more than once and uh pakistan i personally think today is probably more compliant uh with fact of regulations than most any country in the world uh but nonetheless i mean you know if to the extent that they need to also see political will we will exhibit that and and we wish to get out of the fat of gray list i said when i met with fett of people many years ago that pakistan intends to play the role that the international community expects of it to expect of it and we shall do that and i think that uh whether it's fata for whether it's imf uh that we wish to be a normal uh country which plays by the rules that are you know applicable to uh all other nations uh but we we don't obviously want uh changing goal posts at this point we will have an election in pakistan within the next year but i think by august 10th or something the assembly expires so we have to have an elections before that ours right now is a very uh large coalition with different political parties and we will obviously running elections against each other we are not used to coalition government society has his work cut out for him but i think that if we can deliver some economic successes we should be okay and that's what we're looking for we think or at least we advertise ourselves as the more competent political party in pakistan the most competent political party in pakistan and it remains to be seen whether we can deliver on the promises that we've made to the people of pakistan i think i'll just stop here and then let you ask questions thank you thank you very much in the packet in front of you and in front of all of you is some of the research we've been doing over here we hope it's useful to you and we look forward to doing more of it it includes a very recent report launched at the atlantic council's global energy forum in dubai about pakistan's potential role as an infrastructure connector a report by our own user unis on the potential of web 3.0 for pakistan as well as some political analysis so we look forward to being a partner in your efforts to rebuild pakistan's economy and just on a personal note i should say a decade ago i wrote a book called coalition politics and economic development so if you need help on the coalition part of it i'm happy to make some suggestions too the man is still hawking yeah ten years later i can also tell you what the other two books said but uh here we are i'll talk about your publication academic what else do we do we have the great uh pleasure of having two very leading voices on economic issues one from a global perspective one focus singularly on south asia and pakistan joining us to ask questions of dr ishmael to start and then we'll turn to our audience here in the room i'm going to start with you thank you okay so we're going to start with my colleague josh lipsky senior director of the geoeconomic center josh well thank you you're fun for that introduction minister thank you for being here it's your entire delegation and dr peck here minister of state for finance russia thank you for being here as well it's an honor to welcome you on an extraordinarily busy week it's always busy during imf week but we know this is an extraordinarily difficult and challenging time so we appreciate you making time to be here at the council i wanted to start with what you spoke about with the imf of course a long history between pakistan and the imf and i wonder if you could go into a little more detail for us one how you think your approach might differ from some of your predecessors and thinking specifically on issues of conditionality the things that always become the sticking points in the negotiation what might we expect can you take us inside the negotiations little this week and what we should look for going forward thank you let me start by saying that in in the 1990s early 92 93 after i finished my phd i actually worked at the fund uh as an economist there uh so many of the things that they talk about i actually truly believe this um when i was uh studying in america and when i was when i did a phd i actually was a fairly free market believer in free market i'm still i am but pakistan has made me a little bit of a leftist actually because we have such a elite benefiting country that almost every subsidy that you can speak of actually go to the richest people we have one subsidy program the bispo assass program that is about uh two percent of gdp uh sorry yeah and and no no and not even that actually uh and that about other than that uh you know every subsidy goes to the very rich um and in in in us coming to the imf also is is symptomatic of the fact that you know we rig our system and subsidize the rich and and and do stuff that we end up with with the deficits that we do the huge budget deficits that actually translate into a huge current account deficit then that translates into you know uh losing foreign exchange and then we have to run to the fund so i've thought about this quite a bit and and and and the previous government put me in jail for about five months so that gave me a lot of time to read some books uh not yours and and and it occurs to me that if you keep going to the fund like every so often and i think we've had like 20 some programs that we've never become a rich independent country you know in a way though uh you're sort of a too big country to fail and countries other countries other friends bail us out so we have this habit of going to the fund and getting bailout from friendly countries uh and it but but the thing is that we really have to give up that habit and and doing so and and and there's never a good time to start anything difficult but i think this we might as well just do it now so we've actually had good discussions with the fund i've i mean they've talked about uh removing the subsidy on fuel i agree with them yes it there should be some targeted subsidy to the very poor because you know life has become very difficult especially since the ukraine war um and that just coming out of the covet you know we never had a respite but nonetheless we can't afford to do the subsidy that we're doing so we're going to have to curtail this the other imf front thinks that the imf are asking you know some structural reforms independence of the central bank i mean those are not things that should be controversial those are those are normal things that you know we should be doing anyway uh we run a huge loss in the power sector i think right now the accumulated losses are about 2400 billion rupees in the power sector another 1500 billion rupees i'm told in the gas sector um that's not a good way to run a country really so so i mean you know i mean these are basic management things that you know we failed to do and that's why we keep going back to the fund again and again and until until we get our focus right we will not be able to fix those things and i think that that that is something that we are absolutely sure now that we need to do we've tried everything else so i'll unless one more and then turn to is there really a follow-up on that because you referenced of course higher commodity prices ripple effects from the war in ukraine so i wonder one how that makes what you're saying more challenging to implement but then also just stepping back from a broader perspective you have spoken about the need and pakistan's need to integrate more in the global economy reduction of import substitutions global supply chains how does everything happening now we saw a very sort of gloomy outlook from the imf on the global forecast the downgrade i think some would say that it was almost a conservative downgrade a further downgrade could be coming so how do those sort of external headwinds impact your in reform and implementation plan and mr minister full disclosure we hired josh lipsky away from the international monetary fund so you should know that and dr comes from the funds so that was a good hire by the way so um this ukraine crisis has really you know hurt not just pakistan but a lot of countries right so did kobet but i think the bank uh state bank of pakistan central bank i think steered the country quite well during the covet uh situation and because our currency is uh in a free float with against the us dollar so that automatically provides some question or some breaks against you know uh things that go wrong but it's a challenging situation the the one good thing is that pakistan for instance this year is more than self-sufficient in sugar uh in fact we'll probably end up exporting a little bit uh hopefully um i mean the reports are that we might actually have a good uh wheat crop also we'll if we have to import we'll have to import very little some wheat actually it goes from pakistan to afghanistan so we have to cater for that as well but we should be almost self-sufficient to eat so the only thing that really is hurting us internationally because of the ukraine shock is is the oil prices and that's really hurting us uh the governor tells me that but for oil we are we actually are a surplus of current account and and of the increase of of our imports two thirds is because of vaccines and and and and oil and food um so some diet and some driving less cars and then you know we should be okay so so we'll get over this difficulty the larger problem is that 80 of manufacturing in pakistan is for domestic sector okay i i met today with procter gamble and coke and pepsi and all these people who invest in pakistan and we're very happy that they've invested in pakistan and i was telling them that you know i really want you to export something out of pakistan you know you come here and talk to me about giving you concessions of duties to import which is fine but show me some exports as well 80 percent of what pakistani manufacturers do is sell to pakistan and that's really surprising because pakistan is a poor country with you know with it compared to the rest of the world very small population so why would you set up a factory in pakistan and sell only to pakistanis why would you not sell to the rest of the world and the answer is that because of high barriers we've made selling to pakistanis very lucrative so somehow you have to take down those barriers now the problem with taking down those barriers is that half of the money we make in taxation come from the very barriers that we set up so so it's it's not that easy an issue but uh you know the secretary finance here we'll figure some ways out uh in in the next month and we'll but but seriously i mean we need to move away from this import substitution model uh which is basically rant seeking by the elite and go towards an export model explicit export promotion model and away from this you know import substitution model which basically means that you know you you get to sell to pakistanis with a lot of barriers and that every time needs what happens every time is that every time we have growth it's very easy in pakistan to get growth we have a two and a half percent population increase to get five percent growth is not rocket science we get that growth but then we end up with the current account deficit the issue is now to actually get the sort of growth that doesn't get you there and that can only be done by by robust increase in exports our exports are not that much imports are not that much our exports are not enough and then we that's what we need to focus on thank you sir good to see you again thanks for taking out the time today um you did say in your opening remarks that you know this is an election year you're heading to elections in the next few months i was just curious to hear from you what are two or three measures of success from your point of view that six months down the line if i see you in karachi at your offices um that you would say you know what we actually did a good job and here are three things that i accomplished in my tenure what are those two or three things no matter what we do i'm still going to say we actually did a good job but but but i think the one success for me immediately would be to get pakistan back on track with the imf seriously i mean that's important to me i think that uh if we leave this government whenever we do a year from now most likely that i want to leave pakistan with maybe 50 more reserves than than what i inherited which is 10.8 billion dollars and most importantly i want to have a measure of control on the current account deficit you will still have a current account deficit maybe two percent three percent which is sustainable and which is what a poor growing country should have but but the six percent is is is beyond our means to afford and and and whatever growth we have i know this for a fact that my boss shabbat sharif will want this to be an inclusive growth there's just it's no fun really in pakistan to now have so many people you know 70 million people now below the poverty line that's just that's not how you run a country so if you can have inclusive growth and control the current account deficit i think that would be that would be good job done for me okay my second question was related to bitmore you know looking into the future obviously financial inclusion democratized finance remains a challenge in pakistan the technology sector is booming but off of a low base and i was just curious to hear from you what you're thinking around these new economy areas are particularly given our research here both myself and josh follow this sector closely the emergence of web3 our analysis says that it's a 100 billion dollar export opportunity for pakistan italian in 20 years alone then this is just talent right josh and his team have been looking at central bank digital currencies and the potential there so what is your thinking in terms of enabling some of these new economy opportunities for pakistan such that yes we deal with the crisis but look five ten years down the future and say we're investing in the new economy for the country so let me just confess that i really don't know what web 3 is it's it's so i mean you know so yeah [Laughter] so that said and and that should tell you a little bit about where we would be in five years right no but but but yeah and and and the deputy governor of state bank murtaza is sitting here and i invite him to you know chime in whenever he thinks he needs to uh i don't really know so much about this i know that uh the fintech and new industry you know new technology companies in pakistan have attracted a lot of money last year and and you're right from a very low base uh and and we want to you know have them flourish as much as we can i i don't really know much that we can do to help them i know a lot we can do to harm them so i think as long as the government stays away from them that would help them but but but seriously i i there is a tendency in pakistan that as soon as you see a business you know incipient business coming up we'll start taxing them so i'll remain i'll resist that urge to tax them but i'll let them let them be and let them play their own game and hopefully they'll they'll rise and uh and and keep the government away from them that's that's my short answer but but i really am not very uh educated on on on fintech and and all that stuff if you want to add something please go ahead about the current digital currency and all that especially one of the most exciting things um it's also thank you very much we we uh also have recently put out a licensing framework for digital banks we've got a lot of interest we will be you know giving three banks a license to do things digitally in pakistan we think the financial system actually can help change pakistan's growth model in a big way you know if you have efficient financial intermediation you have you know banks providing financial services in a more in a more broad-based way that can also be an engine of growth in pakistan's case financial development is very low right now uh on central bank digital currencies we are certainly looking at it we're going to be a bit careful uh as we should be but it's something that we are getting a lot of technical assistance on from other central banks as well so i think watch that space i think overall i think your question is a very good one um the digital uh revolution allows pakistan to leapfrog as well and that's going to be very important this is a conversation we'll continue in the private session but it is my great honor to thank you for participating in this public part of the conversation i want to thank our audience online for joining us and as has been acknowledged we are joined by a remarkable delegation from pakistan but i in particular just want to take this last minute to thank our colleagues at the embassy here in washington working with dcm uh bukhari working with councillor shaheed as a credit to your embassy ambassador khan it really has been a tremendous pleasure to work with them to put this event together as well as several events over the past year where we have hosted dr bakker and previous ministers as well so with that uh this concludes the public uh portion of our event uh please join me in thanking the minister right now please [Applause] you