ISLAMABAD: Federal Minister for Finance Muhammad Aurangzeb, while admitting trust and credibility deficit with the International Monetary Fund (IMF) due to rhetoric practice dilemma, said the Fund staff would be visiting Pakistan from next week for stock-taking of the $7 billion Extended Fund Facility (EFF) programme.
The federal minister also revealed that the Fund was taken on board before announcing the power relief scheme – “Bijli Sahulat” package.
Finance Minister attended the 10th Islamabad Literature Festival here on Friday where he was engaged in a session titled “Economic Stabilization and the Journey to Growth” featured a discussion between the Finance Minister and Dr Vaqar Ahmed.
The minister also confirmed that government has exceeded the IMF target for bringing traders and shopkeepers into the taxes net and collected Rs 10 billion in taxes in the first quarter, while saying there was no tweets or push back. Government would go for privatization of PIA again, as it could not be retained, the minister added.
The minister also announced that legislation regarding taxing agriculture would be completed by end December, 2024. The minister also said that there was a need to rationalize taxes, who are over burden including the salary class and industrial sector, while agriculture, real estate and retail sector needs to contribute to the economy by paying more taxes. Tax to GDP is around 9-10 percent which is not sustainable, said the minister adding that it would be taken to 13-13.5 percent.
“Philanthropy is a valuable resource, but the country needs taxes to sustain long-term growth. Energy costs are moving towards affordability, but further structural reforms are necessary. State-Owned Enterprises (SOEs) must undergo reform and should be privatized. The private sector must take the lead, and the dependency on the government must be reduced to allow for more efficient and effective management,” he added.
Economy: Aurangzeb outlines steps
The government signed a ‘National Fiscal Pact’, aimed at bringing uniformity to provincial taxes and boosting revenue collection, which was a big achievement for the first time in the country.
The minister said the macroeconomic stability was achieved as the twin deficits i.e. fiscal deficit and current account were in right direction foreign exchange reserves improved and would achieve the three month import cover while expecting it to reach around $13-14 billion by March 2025.
Aurangzeb said that economic stability was the basic hygiene, however, he underscored the urgency of implementing structural reforms to reshape the country’s economic “DNA,” aiming to ensure that Pakistan will not require further assistance from the IMF. He emphasized on the structural reforms and macroeconomic stability, which he said are crucial for sustainable economic progress.
Aurangzeb warned that without reforms, Pakistan will continue to rely on its salaried class and manufacturing sector for taxes, emphasising the urgency of changing the country’s economic “DNA” to ensure that this is last IMF program Pakistan requires.
The finance minister reiterated the government’s commitment to reforming state-owned enterprises (SOEs) and ministries to ensure they function effectively for the public. “We are working to improve performance and transparency, and any ministry or institution that remains will be restructured for optimal efficiency,” he said. As part of this effort, the government is also addressing pension reforms.
He added that macroeconomic stability achieved during the first quarter of the current fiscal year provides a foundation for inclusive and sustainable growth, but it must be maintained to ensure long-term success.
Minister said, noting that Pakistan’s credit rating has improved and is expected to see further gains this year.
Aurangzeb also underscored the need to reform the pension system and highlighted the critical role of technology in governance to increase transparency, reduce corruption, and enhance service delivery. “If reforms were easy, they would have been done years ago,” he said, urging the private sector to boost productivity and continue expanding their businesses.
The minister said that the time was over for safe deposit to be dolled-out and rolled over again and again and there is need to bring investment from friendly countries. The non-privatization of PIA is a major setback, said the minister while confirming that government go for it again.
The minister further said that bonds would be issued in the global market in next fiscal year, as the government was in touch with global rating agencies and informed by giving them fact-based briefing. If our rating improves, we will issue bonds in the global market, said the Finance Minister, adding that they were working on issuing panda bonds in China.
The minister also said that inflation has come down and its benefit should reach the common man. Chicken prices in the world market decrease while in Pakistan it increased by 15 percent and the same is the case for pulses. However, the government would go after those involved in such practices.
Copyright Business Recorder, 2024
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