'They have IITs': Ex-Pakistan Finance Minister praises India amid default scare

Pakistan's former Finance Minister Miftah Ismail has hailed India's premier engineering institutions - IITs - for creating the information technology sector in the country. He also said that Pakistan has a law and order problem due to which foreigners don't invest and don't buy back office services from Pakistan. "They have IITs and other great universities and we don't," the former minister said when asked why Pakistan's IT sector was contributing only around 1 per cent to GDP compared to India's which is projected to be around 10 per cent to its GDP in FY2025.

Pakistan is in the middle of the worst economic crisis as forex reserves have plunged to record lows and inflation is inching towards 30 per cent, the highest in five decades. The cash-strapped government has hiked fuel prices and working on cutting subsidies to secure much-needed funds from the IMF (International Monetary Fund). 

Also Read | 'Move beyond Jinnah': A financial guru traces the origins of Pakistan's economic despair
     
Miftah Ismail, who holds PhD in public finance and political economy from the Wharton School, served as Pakistan's finance minister from April to September 2022. Recently, he invited people to ask him anything about the balance of payment crisis in Pakistan.

Asad, a user, said that the most realistic way to boost the economy is through the IT sector. "India became an IT giant from their change in policies in the 90s and early 2000s and their IT sector is projected to contribute around 10% to their GDP in FY2025. Why does our IT sector only contribute around 1%?" he asked.

Responding to him, the minister said India's IT sector was growing because it has IITs and other great universities. "Because they have IITs and other great universities and we don’t. Also because of the law and order problem in Pakistan foreigners don’t invest in Pak and don’t buy back office services from Pak," he said.

Another user, Sachal Khalid, pointed out another problem in Pakistan's universities. He said in Indian universities, there is a culture to solve leetcode code problems not at the end of the degree but when they get admission. "But here in Pakistan, the students even don't know what is leetcode. So FANG (Facebook, Amazon, Netflix, and Google) hires Indianan instead of us," he said.

Pakistan is currently involved in discussion with the IMF for the release of another tranche of $1.1 billion, part of a $7 billion bailout package secured in 2019.

But will this money be enough for Pakistan to manage economic challenges and avoid default? asked a business journalist. To this, Ismail said: "Things will be tight for a while but we can get enough loans for now that we will get some room. But for the future, we have to figure out a way to export more."

Mohammed Sohail, an analyst at Pakistan Stock Exchange and investment banker, asked how can Pakistan sustain debt repayment without debt restructuring.

The former finance minister said that 40 per cent of Pakistan's debt was from multilateral institutions and 10 per cent were deposits of friendly countries, they can’t be restructured. "35% are Chinese & Paris Club loans & 15% commercial loans. It's easier to get new loans from Paris club & China than restructure. Lenders frown on restructuring," he added.

Ismail said the remaining IMF loan was about $2.5 but the more important part was that once Pakistan was in an IMF programme it can get loans from other sources.