KARACHI: Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb announced on Saturday that Pakistan will secure an extended International Monetary Fund (IMF) programme on September 25, focusing on structural reforms.
Addressing the CFA Society of Pakistan’s 21st Annual Excellence Awards, he expressed the hope that this would be the country’s final IMF programme but warned that failure to sustain reforms might lead to a 25th programme.
The minister stressed the need for macroeconomic stability, saying that Pakistan has previously experimented with various economic models, none of which yielded the desired results. He also stressed the importance of moving beyond these models, saying, "There is no automatic switch to run the growth engine."
He underscored that Pakistan’s economy, traditionally centred on imports and import substitution, must pivot toward exports. The government, he declared, will no longer provide subsidies to import-driven industries but will instead focus on attracting foreign direct investment (FDI) for an export-led economy.
Aurangzeb credited the caretaker government for securing a nine-month standby agreement with the IMF, acknowledging the tough decisions and fiscal discipline it implemented. He highlighted that structural benchmarks were signed under this government, an achievement not realised by the previous administrations. “We have signed and done it,” he affirmed.
Addressing the tax-to-GDP ratio, Aurangzeb stressed that the country cannot survive with a ratio of 9 to 9.5 percent, advocating for an increase to 13 percent or higher. He emphasized the urgent need to broaden the tax net, targeting those currently evading taxes. In this regard, he highlighted the digitalisation of revenue collection, which he said will reduce human intervention, promote transparency and curb corruption. "We already have the data for digitalisation," he noted.
Aurangzeb also pointed to a troubling imbalance, saying that while 43 percent of the population contributes to GDP, they pay less than 1 percent in taxes. "A country cannot be run on charity; taxes are essential to keep the nation running," he said.
On the issue of state-owned enterprises (SOEs), the minister reiterated that "the government has no business being in business".
Regarding public finances, he acknowledged public calls to cut expenses and referred to reports by Dr. Ishrat Hussain and Dr. Kaiser Bengali on rightsizing the government. He called for the devolution of federal ministries in line with the 18th Amendment, saying that 17 to 18 ministries currently under federal control should be devolved to the provinces. Additionally, he advocated for a shift toward public-private partnerships.
On pensions, Aurangzeb announced that any new federal government employees would be required to contribute to a defined-contribution pension scheme. He stressed the need for Pakistan’s economic focus to shift from imports to an export-driven model. “We are done with import substitution. We will not give further subsidies or credits. Everyone has to contribute toward exports,” he stressed.
As Pakistan prepares to re-enter international capital markets, including China’s bond market, he expressed optimism. He pointed to declining inflation and policy rates as positive developments and highlighted the need to transition from economic stabilisation to growth, identifying agriculture and information technology as key sectors for future development.
Concluding his speech, Aurangzeb highlighted two major existential challenges facing Pakistan: the country’s rapidly growing population, with an overall growth rate of 2.55 percent and 3.6 percent in urban areas, and the pressing issue of climate change. Both, he said, require immediate and sustained attention as Pakistan moves forward.