Aurangzeb expects central bank reserves to be $9-10bn by FY24-end

Federal Minister for Finance and Revenue Muhammad Aurangzeb said on Tuesday that he expected foreign exchange reserves held by the State Bank of Pakistan (SBP) to close this fiscal year at around the $9-10 billion mark.

Reserves held by the central bank are currently just over $8 billion despite a $1-billion bond payment.

In the keynote address at the inaugural session of the 7th Leaders In Islamabad Business Summit themed ‘Collaborating for Growth’, Aurangzeb said he also expects to reach a staff-level agreement with the International Monetary Fund (IMF) by June-July.

He said the government has taken steps to stabilise the economy and promote growth opportunities.

The senator said the SBP’s foreign exchange reserves have jumped from $3.4 billion last year, equivalent to only 15 days of import cover, to over $8 billion.

“Once the final tranche comes from the IMF by the end of this week, our foreign exchange reserves will be over $9 billion, and by the time of end June, our reserves will be anywhere between $9-10 billion, which is going to be equivalent to two months of import cover,” he said.

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IMF programme or Pakistan’s programme

Dismissing the negative impression of the IMF programme, Aurangzeb termed it as “Pakistan’s programme, which is helped, supported and assisted by the Fund”.

“This is our requirement as a country if we want to get out of the trap we are in.”

In talks with the IMF, the finance minister shared that the Pakistani authorities had “a very good discussion in Washington, with a view that we go for a larger and a longer programme”.

“We’ll start discussions on the contours of the programme when the IMF mission visits Pakistan in the middle of May, and we are hoping that if all goes well, and we agree on the privatisation, we can get into a staff-level agreement by the end of June or early July, so that we could move on,” he said.

The Senator said the IMF is a means to an end, but not the end.

“If we want to bring permanence to it, we need to focus on the road to the market,” he said.

Positive indicators

He said that the GDP is expected to grow by 2.6% in FY 2024, whereas the inflation rate is expected to be 24% in FY 2024.

His expectation of Pakistan’s economic growth is higher than those set by the IMF and the World Bank.

“The government is taking measures to control the pressure of inflation and provide relief to the weaker sections of the society,” he said.

Moreover, the government has set targets to keep the current account and fiscal deficit within reasonable limits.

Aurangzeb said the economic outlook is positive due to active government initiatives and better coordination with development partners.

“We have had bumper crops, and on the back of that, our agriculture GDP is growing at 5%, which is an important growth lever,” shared the minister.

On equities, Aurangzeb said the stock market is at an all-time high “and we also see now the beginning of foreign buying coming into the market… which is a good sign as we go forward”.

Aurangzeb reiterated that the country is “in a good place, and this was ushered by the nine-month SBA, which was taken through the finishing by the current Prime Minister”.

“The IMF is known as the lender of the last resort for a reason, there is no plan B,” Aurangzeb said.

About his recent visit to Washington DC, Aurangzeb said the institutions appreciated Pakistan for “showing the necessary discipline, to go through the programme”.

The federal minister said that the government intends to bring in the untaxed and under-taxed sectors into the net, for which it will collaborate with the provinces. “So that we start moving towards 13-14 % tax-to-GDP, a more sustainable range, in the next 3-4 years.”

Privatization of PIA

On SOE reforms and privatisation, the Finance Minister said that the privatization of PIA is in progress.

“The Expression of Interest had been submitted, and we expect the bids to come in,” he said. “We are also seeing interest in the Islamabad Airport, but the government wants to accelerate the privatisation agenda as we go forward,” he shared.