AS Pakistan heads into the new year with the economy teetering on the brink, Dawn spoke with Dr Ayesha Ghaus-Pasha, the state minister for finance.

Below are the excerpts from her interview conducted via Zoom: Question: Please elaborate on the nature of the current economic crisis for lay readers.

Answer: In Pakistan we have never tried to deal with the structural issues and always looked for quick fixes. The result is that the more minor crises have become systematic and far more intense than the ones seen in the past.

When we came into power, the country was in an International Monetary Fund (IMF) programme, but it was suspended because we had not implemented the lender`s conditions.

It meant that our chances of meeting our external financing needs had shrunk. During the last financial year, our imports shot up beyond $72 billion, and we had only $31bn from our export earnings to finance this trade deficit. Even if we count in remittances of $31bn, we still were short of $10bn.

Like our external imbalances, we also have been running large fiscal deficits in the range of 7-8 per cent of GDP. This is also part of the same story: we are living beyond our means.

Q:So basically, you are saying that our economy is afflicted with structural problems that no previous government has tried to tackle? A: Yes. We have in the past circumvented these issues by taking loans from the IMF, get-ting external financing from other sources or injections through the war on terror.

After we came to power, we tried to control the situation. We achieved some success in the sense that we were able to revive the IMF programme, our inflows from multilateral and bilateral sources are starting to increase, and confidence in Pakistan is building. Things are moving in the right direction and slightly improved.

I wouldn`t say that all is well or everything has improved. But I`d say that the pace of economic deterioration is controlled. There are indicators that things are picking up.

Q: You revived the IMF programme but we see it has again run into trouble after the release of one tranche. What has gone wrong? A: Let me first state very unambiguously that the programme isn`t suspended. The review has indeed been delayed, but it is because of the floods. The IMF wants us to assess how these floods will affect our budget and how we will finance rehabilitation and reconstruction. It is a big exercise and takes time to complete.

We have arranged a donor conference in Geneva to seek the world`shelp for post-flood rehabilitation and reconstruction on January 9. Only after that will we know how many resources the world is ready to provide us and how we can mould our development programme.

Q: Is this the only cause of tensions with the IMF, or are other issues like the imposition of additional taxes and energy prices impeding the agreement? A: Our tax revenue collection during the first quarter of the present fiscal year has exceeded the target. But it is also true that the contraction in economic activity will affect tax revenues going forward. We will not impose additional taxes until it is clear that we cannot meet our revenue targets through other means.

Q: Despite what you`ve done to bring IMF back, the markets remain jittery about the possibility of Pakistan defaulting on its debt obligations.

A: There is no chance of us defaulting on foreign debt obligations this year.We are honouring our debt obligations and have the resources for that.

Q: How do you look at the economy faring in 2023? A: The year 2023 will be a tough year for us and the global economy, as forecast by the IMF. Our exports are falling due to the international recession, and our exporters will have to compete harder to get a share of the contracted export market.

We have given our exporters incentives, and now it depends on them how far they can compete.

As far as growth is concerned, I hope that it will start improving from the next fiscal year from the projected 2pc this year, depending on how quickly we revive our economy. We may not be able to achieve 5-6pc GDP growth immediately in the subsequent years without addressing structural issues but the economy will start showing improvements. If flood reconstruction starts significantly, the external sector improves, and business confidence revives, we can escalate growth. •