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ISLAMABAD: Finance Minister Muhammad Aurangzeb said on Tuesday that the government is committed to keeping Pakistan on track with structural reforms in key economic sectors, including energy, state-owned enterprises, privatisation, taxation, and government rightsizing.
He said that Pakistan has previously been seen as a “single-tranche country”, but the time has come to change this perception by implementing the structural benchmarks agreed upon under the IMF programme to ensure lasting macroeconomic stability.
Speaking to a group of investors led by Barclays, Mr Aurangzeb briefed the delegation on various policy interventions and initiatives undertaken over the past 12 months to reform the economy. He provided an overview of the growth and macroeconomic stability in key economic indicators, including twin deficits, a stable currency, foreign exchange reserves, and inflation, which he described as a “big story throughout the year”.
The finance minister credited the current macroeconomic stability to the successful conclusion of the nine-month IMF Stand-by Agreement initiated by Prime Minister Shehbaz Sharif and implemented rigorously by the caretaker administration. This, he said, has paved the way for a larger and longer Extended Fund Facility (EFF) to bring permanence to macroeconomic stability and implement structural reforms.
Says new fiscal year started with continuation of macroeconomic stability in first quarter
Mr Aurangzeb said Pakistan’s ability to clear letters of credit and import backlogs by May and June last year, as well as clear payments of nearly $2 billion in profits and dividends to foreign investors, was a positive outcome of this stability.
He added that the new fiscal year had started on a clean slate, with the continuation of macroeconomic stability in the first quarter. He pointed out that the current account deficit remained under control due to strong remittances, healthy RDA flows, and positive trends in exports, particularly in the diversification of exports and a significant increase in IT exports and services, as seen in August figures.
The finance minister also mentioned recent credit upgrades by international rating agencies and outlined plans to access international capital markets. He explained that the government had sent strong signals to the local market by scrapping some bank auctions, indicating that it was not desperate to borrow and would only do so at more favourable rates.
Mr Aurangzeb said the government wanted the banks to start lending to the private sector on impersonal terms and also mentioned the incentives offered to banks in the budget this year for increasing their micro-lending to the private sector, particularly agriculture, IT ecosystem and the SME sector.
He also discussed the signing of a National Fiscal Pact between the federation and its four units as part of the government’s reforms agenda, aiming to let the private sector lead growth, with the government providing policy support and continuity.
In response to a question, the minister noted the sharp drop in inflation from 38 per cent last year to a 44-month low of 6.9pc in September, calling it a strong indicator of economic recovery.
Members of the Barclays delegation praised the finance minister for his comprehensive briefing on Pakistan’s economy, expressing appreciation for the structural reforms and stability visible across sectors. They also showed strong interest in exploring investment opportunities and business collaborations in Pakistan.
Meanwhile, Aurangzeb held a meeting with former SBP governor Reza Baqir, who is now managing director of the Sovereign Advisory Services of Alvarez and Marsal (A&M), a leading global professional services contracted by the Pakistan government to provide it expert advice and consulting support for operationalisation of the Pakistan Sovereign Wealth Fund established pursuant to the Pakistan Sovereign Wealth Fund Act 2023.
During the preliminary meeting, Mr Baqir and his team discussed their strategy and the way forward with regard to their work in line with the assigned responsibility.
Published in Dawn, October 9th, 2024
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