Addressing the World Government Summit in Dubai, the premier recounted his government's reform agenda which he said they undertook to improve all of the country's economic policies.
Khan made a point to repeatedly hit on the need for economic reforms as International Monetary Fund (IMF) chief Christine Lagarde looked on from the audience.
“I repeat the reforms are painful ... It's like a surgery. When you conduct surgery for a while the patient suffers but then he improves,” Khan said. “The worst thing that can happen for society is that you keep postponing reforms because of the fear that you would have opposition, the vested interests stand up and you don't do reforms.”
The prime minister said his government was making efforts to cut down the fiscal deficit and imports and improve exports. "We have unfortunately had to raise bills because when we got into power we had a massive fiscal deficit and current account deficit," he told the audience that included world leaders, policymakers and businessmen.
He believed that Pakistan "now has a chance", with optimism already visible and investors coming into the country.
"We feel that this is the time that Pakistan will take off," the premier said with confidence.
Noting that investors must be allowed to make money, Khan said the government has been focusing on making it easier for people to do business in Pakistan. "We are changing our tax laws which were very cumbersome," he said, adding that signs of improvement taking place due to the reforms can already be seen.
The prime minister said his government was opening up the country for investors and tourists, and cited a new visa-on-arrival policy in this regard.
"This is the time to invest in the country and don't miss the boat," he told investors.
Khan said people were making money in Pakistan until the 1970s, when during the tenure of a socialist government the country's bureaucracy and politicians started believing that making money was somehow a sin. "So now we are reversing the whole thing," he said, stressing the need to generate wealth that could be used to lift people out of poverty.
But Khan said his government desired equitable growth.
"We don't want the rich to get richer and poor to get poorer," he said. "I am really against this neo-liberal economics where you have 62 people owning as much wealth as 3 billion people on this Earth."
The annual World Government Summit sees global leaders and sheikhs cross paths at a luxury hotel near Dubai's iconic, sail-shaped Burj al-Arab hotel. While typically an upbeat celebration of business buzzwords and self-help talks, this year's summit comes amid a worldwide turn toward populism and anti-elitism.
The premier's participation in the 7th edition of the summit will underscore Pakistan’s strong interest in the knowledge economy, green development and the importance of innovation for growth.
Foreign Minister Shah Mahmood Qureshi, while speaking to journalists before departing for the UAE, said that governance is an important issue in the region in general and Pakistan in particular.
He explained that bad governance has created a lot of problems currently being faced by the country. He said the premier has been trying to introduce a fresh model and reforms for improvement in the performance of institutions.
Prime Minister Khan recalled his journey from international cricket to the world of politics and reminisced the earlier decades of Pakistan's history, during which he said the country was progressing rapidly.
"The life of a country is in cycles, it's never in a straight line," he said.
The premier said he realised that while Pakistan was among the top five most charitable nations in the world, it was at the bottom of the countries where people pay taxes. He ascribed this to a lack of trust in the government among the people.
Citing the rapid development of the UAE and China, Khan said the key to countries' development was governance. He said he wanted to see Pakistan function on the principles of justice and humanity that were the hallmark of the welfare state of Madina.
The premier said for Pakistan to rise, it must have the rule of law; the state must take responsibility for its poor people, and a reform programme must be started.
Khan recapped some of the steps his party took when it came into power in Khyber Pakhtunkhwa as part of a coalition government in 2013. He claimed that they were able to halve the poverty in the province in the next five years and returned to power with a two-thirds majority in 2018.Prime Minister Khan earlier in the day held a bilateral meeting with the Crown Prince of Abu Dhabi Sheikh Mohammed bin Zayed Al Nahyan in Dubai.
The prime minister, who is on a day-long visit to the United Arab Emirates, exchanged views with the Abu Dhabi crown prince on matters of bilateral interest. Sheikh Mohammed received the premier upon his arrival in the emirate.Khan also held separate meetings with Lebanese Prime Minister Saad Hariri and Dubai ruler Sheikh Mohammed bin Rashid Al-Maktoum.
A tweet by the PTI regarding the premier's meeting with the Dubai sheikh said: "Both leaders underscored the importance of greater collaboration in all areas of common interest especially in enhancing investment and trade."The prime minister was accompanied by Foreign Minister Shah Mehmood Qureshi, Finance Minister Asad Umar, Minister for Maritime Affairs Ali Zaidi, Adviser to the Prime Minister on Commerce Abdul Razzak Dawood and Adviser to the Prime Minister on Institutional Reforms Dr Ishrat Hussain, according to a press release issued by the PM Office media wing.
Although no details regarding the meeting were immediately issued by the government, the prime minister tweeted that there was "a convergence of views" between him and Lagarde when it came to "the need to carry out deep structural reforms".
He said that these reforms would "put the country on the path of sustainable development in which the most vulnerable segments of society are protected".
A press release issued by the IMF said Lagarde's meeting with the premier had been "good and constructive".
The meeting was held to discuss conditionalities that have held up Pakistan's accession to the Fund's bailout programme.
"We discussed recent economic developments and prospects for Pakistan in the context of ongoing discussions toward an IMF-supported programme," Lagarde was quoted as saying by the statement.
"I reiterated that the IMF stands ready to support Pakistan."
The IMF chief said she highlighted during the conversation that Pakistan could "restore the resilience of its economy" through "decisive policies and a strong package of economic reforms".
Citing the PTI government's policy agenda, Lagarde said protecting the poor and strengthening governance were "key priorities to improve people’s living standards in a sustainable manner".
According to a statement released by the Ministry of Finance on Twitter, "deliberations between Pakistani authorities and IMF staff will continue to finalise an agreement on the contours of a programme".
Earlier, Information Minister Fawad Chaudhry had said the Khan-Lagarde meeting would "give us a chance to understand the IMF views and we will be able to give our version to [the] IMF chief", Radio Pakistan reported. Chaudhry claimed that Pakistan wants "a fair deal that can actually help Pakistan in the short-term without affecting our long-term economic goals".
Meanwhile, Foreign Minister Shah Mehmood Qureshi stressed that Islamabad wanted to proceed with the bailout package under conditions that would not add an unjustified burden on the common man.
Stumbling issue in IMF bailout talks
The IMF is asking for an adjustment of around Rs1,600-2,000 billion over three to four years. It also wants some corrective measures to put Pakistan’s economy on the right track after witnessing the highest-ever current account deficit.
But the stumbling issue in the talks is the pace of adjustments in the current expenditure. The emphasis on current expenditures comes as a result of a focus on what is known as a ‘primary balance’ in the parlance of public finance.
According to a senior official involved in the negotiations, there is some space for a cut in certain expenditures where Pakistan is in a comfortable position. "This agreement in cut will pave way for accession to the programme," the official claimed, adding it will be a politically difficult decision.
A cut in the current expenditures still seems to put the government in an awkward position by making adjustments in subsidies and other special grants.
The IMF has been demanding that the burden of any expenditure cuts should fall on current expenditures that include debt service, defence, and subsidies. Previous governments decreased development expenditures when undertaking the Fund’s adjustment and usually left current expenditures alone (other than subsidies).
But the official said there is certain non-development spending which cannot be discontinued or reduced.
The primary balance of a government’s budget is the difference between revenues and expenditures after removing interest payments. It tests whether the path of debt accumulation of any country is sustainable or not.
If this is in deficit then it means that at least some of the interest payments due in the given year will have to be made through borrowing.
Cutting the primary deficit requires a cut in current expenditures, and usually becomes necessary when reducing debt-to-GDP ratio is a priority.
Finance Division’s Spokesperson Dr Khaqan Najeeb told Dawn that productive dialogue continues with IMF on all areas including fiscal, energy, structural reforms and monetary policy. Discussions are part of regular ongoing interaction between government and IMF and will continue in coming weeks as well, he said, adding that "technical level subject-specific discussions also support the process of overall dialogue".
According to Najeeb, the government has already taken several policy measures including an increase in interest rate, gas and electricity tariffs along with revenue measures.
The Ministry of Finance recently announced that the Federal Board of Revenue’s (FBR) target would not be revised downward following a revenue shortfall of Rs191bn in the first seven months.
The FBR has been asked to take administrative measures including revival of tax on mobile phone cards to cover up the shortfall in reaching the budgetary target.
The Fund has also asked for further monetary tightening as well as a complete free float of the exchange rate.
"We are already moving towards the target in these areas," the official said, adding the IMF has acknowledged these measures.
According to the official, the finance minister has already conveyed to the IMF during recent parleys that only those measures will be taken which are favourable for the country’s economic growth.
Although the government has secured breathing space through Saudi Arabian and United Arab Emirates loans, an IMF programme is essential to unlocking access to resources from other multilateral lenders like the World Bank and the Asian Development Bank, as well as global capital markets.
