LAHORE: Federal Finance Minister Muhammad Aurangzeb said on Sunday that the International Monetary Fund (IMF) team had reached Islamabad and the two sides would start talks for a new loan programme on Monday (today).
Addressing a pre-budget conference 2024-25 here at a local hotel, Aurangzeb said Pakistan was currently applying for the 24th IMF programme and would require the 25th as well if structural reforms were not introduced.
Pakistan is eyeing a larger and longer IMF programme to stabilise and revive its economy. The dialogue would determine the size and scope of the new deal. However, it was earlier reported that the government wanted a three to four-year bailout package of $6 billion to $8 billion.
The minister pointed out that the country’s foreign currency reserves have crossed the $9 billion mark and confidence of foreign investors is improving due to the government’s effective economic policies. He said that Foreign Direct Investment (FDI) was pouring in from Saudi Arabia, China and the EU due to investment initiatives taken through the SIFC.
The country’s exchange rate is to be brought down to facilitate the businessmen. He said the currency is stable and the stock exchange is hitting an all-time high due to portfolio investment by foreign investors, which is a good sign. He covered a variety of subjects, including the rupee exchange rate and interest rates, which are determined by the State Bank of Pakistan.
Further, improving tax-to-GDP ratio, fast privatisation of state-owned enterprises (SOEs) and overhauling the energy sector are priorities of the government, the minister said adding the government would accelerate the privatisation agenda. He cited that local investors are in the run to get PIA and Islamabad airport.
The minister said competitive energy was the solution and they were bringing reforms in the energy sector. “We had to check power pilferage,” he said. He said that Discos Board of Governors was being reconstituted by the power minister and private sector people are included in it.
The minister said the government’s work was to make policies that have to be implemented mainly by the private sector; it has to play its role in bringing the economic situation out of difficult times. He said that privatisation will have to be done for economic stability.
“Macro-economic stability has been witnessed over the last few months and there is a need to move forward for sustainable economic growth,” he said, asking the private sector to come forward to lead and steer the economy.
The minister said that the role of the government was to provide policies while the private sector should ensure productivity in real terms. “We would move forward after consultation with the provinces; we want growth and development in the country.
We had to change the fundamental equation; the country’s big issue is the undocumented economy. We need structural reforms and lower the current account and budget deficits. Moreover, the salaried segment of the society is a part of the tax net and likewise, the business community has to be made a part of it. The country’s economy will be documented from now on. Let me make it very clear that we have to broaden the tax net. This is the need of Pakistan,” he mentioned.
The government will expand the tax net to boost the tax-to-GDP ratio, currently around 9 percent, which is one of the worst in the world. The track and trace system was a tremendous failure due to implementation failures and lacked implementation mechanisms. “We have to stop leakages and bring untaxed sections into the tax net,” he added.
Sharing his private sector experience as head of the Business Council, he said there was Rs10 trillion cash in circulation; “when we talk about the undocumented economy, I had said there was ‘war on cash’. If we document the economy, the size of the country’s economy is much bigger.”
Talking about the registration of traders, he said that April was voluntary for registration, but now they have to move forward by removing impediments and overcoming the trust deficit.
Terming the digitalisation of the tax system vital for modernising tax collection, enhancing transparency and revenue growth, the minister said that a contract has been signed with the global consulting firm McKinsey and Company to digitalise the tax system. “Digital transformation is a key priority for the government, and this collaboration underscores the government’s commitment to improving tax collection to promote sustained economic growth. We look forward to seeing the positive impact of this initiative on Pakistan’s economy,” he remarked.
Responding to queries from business leaders, the minister said that agriculture and Information Technology are under our control and we need to strengthen both the sectors.
To another query about issues of SMEs, he said that consultation will be made with the chambers of small traders. He said he had already asked the CEOs of banks to increase financing in SMEs, IT and agriculture sectors. Ending his speech, he observed that government would have to move forward by overcoming the trust deficit and introducing a balanced approach.
