- Aurangzeb lays out the economic strategy in the first press briefing
- Hints at a potential cut in the central bank’s policy rate
- Pledges to quickly implement digitalization of the tax system and PIA privatization
- IMF team coming in Islamabad this week for second review of $3 billion package
ISLAMABAD: In an effort to maintain the recently established macroeconomic stability, the government announced on Tuesday that it intended to negotiate a “longer and larger” economic bailout package with the International Monetary Fund (IMF).
Finance Minister Aurangzeb Khan, a trained banker, also alluded to a possible lowering of the central bank’s policy rate in his first official press conference following a series of briefings on the fiscal position and external account requirements, though he qualified his suggestion with a caveat regarding the independence of the monetary policy committee.
In addition, Mr. Khan promised to swiftly achieve full digitalization of the tax system, from assessment to collection, with the goal of improving transparency and expanding the revenue base. Additionally, he declared that Pakistan International Airlines (PIA), the country’s flag airline, will soon be privatized.
This week, the minister announced, an IMF team would visit Islamabad for a second assessment of the $3 billion Standby Arrangement (SBA), which is currently in place.
He stated that during these discussions, “we would be very keen to start discussions on another EFF (Extended Fund Facility) with them.” He also mentioned that more discussions on the program would be pursued off-site during the IMF and World Bank’s spring meetings in Washington, D.C., in April.
Talks with the IMF on the second and final assessment of the current SBA are slated to take place from March 14 to 22, according to another official.
“We would at least kick-start the process and get this going” during these discussions. Mr. Khan stated, “Let’s see how they react. Hopefully, in April, the two sides will talk on the next program’s blueprint.
The minister did not say whether Pakistan will look to the IMF for climate risk-related funding to supplement the EFF, given that Bangladesh had recently received $3.3 billion under the Resilience and Sustainability Facility (RSF).
The minister announced that the government would soon start focusing on realizing money from real estate, wholesale, and agricultural enterprises. He said that the federal government would begin by effectively taxing the wholesale industry and addressing the discrepancy between tax revenue and GDP share, even if agriculture was the purview of the provinces.
The minister expressed optimism over the successful conclusion of the current SBA’s final review, citing compliance with its stipulations. According to an official, 24 of the 25 policy acts have been fulfilled, with the other ones being insignificant.
According to Mr. Khan, Pakistan has to give the recent financial stability some permanence, which calls for a longer and more comprehensive program. This is because it will have an impact on the upcoming budget that will be implemented shortly after.
The fact that 2023 concluded in a far better state than the previous year, especially in terms of macroeconomic stability, which could eventually result in a faster growth rate, was deemed positive by him. Otherwise, he claimed, there was no magic bullet to enter a high-growth phase without causing the kind of foreign exchange crisis that had been seen in the past.
He added that practically all structural benchmarks and reform initiatives were on the table, well known, and included in all previous IMF programs signed by the finance ministers of every government since Asad Umar, Hafeez Shaikh, Shaukat Tarin, Miftah Ismail, and Ishaq Dar.
“For a sovereign of 245 million people with nuclear capabilities, continuing with patchwork was no longer the way to live,” he declared, unless structural objectives were met.
In the true spirit of urgency, he said, the nation now had to enter the phase of execution and implementation for all economic reforms, since the prime minister had made it abundantly evident in the first cabinet meeting that numerous discussions and debates had already taken place and that a debating club was no longer necessary.
He mentioned that other analytical assessments, such as one from the World Bank, discussed increasing the GDP from above $300 billion to $3 trillion by 2047.
“We now need to stop leakages in various forms and shapes,” the finance minister stated, starting with the FBR reforms through digital expansion for transparency and better service.
Similar to how he helped HBL grow from 12 million customers in 2018 to 36 million in December 2023 through his banking expertise, Mr. Khan stated that digitization would be necessary for an end-to-end customer journey and for reducing human interactions, which would increase efficiency.
He claimed that the FBR now possessed sufficient information to paint a full picture, including power bills, overseas travel, and taxes paid.
He declared, “This is a low-hanging fruit,” and indicated that in order to filter the data before delivering it to field formations, fresh data analytics teams would be hired right now.
“We’ve already begun to work on identifying the implementation partner, providing us with knowledge, and outlining the entire process for broadening the tax net. This will be crucial in stopping the money drain, he stated.
Second, he declared that the government will now “in a very big way” begin the process of privatizing state-owned businesses (SOEs), beginning right away with PIA.
When PIA’s divestiture was ready, Mr. Khan indicated his ministry would fully back Privatization Minister Aleem Khan.
He declared that the new administration will just establish a framework for policies, allowing the private sector to take over and run the company, even using the public-private model.
According to the minister, macroeconomic stability might also be used to gradually address the serious problem of inflation. Although he acknowledged the independence of the State Bank’s monetary policy committee, he maintained that he expected the policy rate to decline eventually since it was crucial for business.
