Finance Minister Shaukat Tarin said Thursday the International Monetary Fund (IMF) had forced Pakistan to raise interest rates and electricity prices, doubling the cost of servicing debt and increasing inflation.
Responding to PML-N’s criticism of the government’s economic policies, the Minister of Finance also said that the 5.5% growth rate when the party was in power would be driven by credit.
“Debt repayments are increasing due to rising interest rates,” Tarin said.
He added that inflation was rising due to high capacity payments and the IMF had forced the government to raise electricity prices by 46% at the start of the program.
“The IMF is putting a gun in our heads to set an interest rate of 13.25%, which increases debt repayments,” Shaukat Tarin said.
However, Shaukat Tarin did not mention the heat of foreign currency as the main reason for setting high interest rates.
Foreign lenders have set three conditions for investing in the national debt: positive real interest rates, a stable exchange rate, and tax exemptions on hot foreign currency gains.
The Express Tribune reports that the adoption of these terms resulted in $3.6 billion in inflows for the year, which evaporated as the central bank cut interest rates after the Covid-19 boom.
When asked, Tarigan said the investment-to-GDP ratio had declined during the three years of PTI, but this was due to the Covid-19 outbreak.
“The 5.5% rate of growth was fuelled by huge borrowing, which stimulated also the economy [under the previous government];” the minister said.
When asked why the PTI government was not aware of the debt report ordered by Prime Minister Imran Khan to determine the use of debt during the PML-N, the minister said the debt committee report was not final.