Aurangzeb explains why Pakistan needs larger, longer IMF programme

Federal Minister for Finance and Revenue Muhammad Aurangzeb said Pakistan needs to move forward with structural reforms to avoid another bailout from the International Monetary Fund (IMF), stressing that a longer, larger programme with the lender is required for execution of the agenda.

Speaking at the Atlantic Council thinktank on Monday, Aurangzeb, currently on a trip to Washington to attend the spring meetings organised by the IMF and World Bank, said Pakistan “doesn’t need too many policy prescriptions.”

“We have known the what and whys, not for years but for decades … it’s time for us to start moving with the execution of those policies,” he said.

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Aurangzeb reiterated Pakistan needs a two- to three-year programme with the IMF to execute much-needed structural reforms.

“Why we are looking for a larger and extended program is so that once we get into the execution mode, which we have, we will need a two- to three-year time period, so that we can actually go through with structural reforms,” he said.

“If we do not go through the structural reforms, unfortunately, we will still be looking at another programme.”

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The federal minister said he would like to get a new Extended Fund Facility (EFF) in place from the IMF “as quickly as we can, but the contours of that are still in preliminary stages, we have just kicked off the discussions”.

During his talk, Aurangzeb highlighted the prevailing economic conditions in Pakistan and the measures being taken by the government.

“We had certainly entered this year in a much better shape than we were at the beginning of the last year. A lot has to do with the nine-month Stand-By Agreement (SBA) programme, which ushered in macroeconomic stability for the country.

“Overall GDP is moving in the right direction, although the headline number is not that significant, but the underlying growth levers i.e. agriculture GDP is growing at 5%, the services sector is moving forward quite well, inflation has come down from the peak of 37-38% to around 20% and the exchange rate is stable,” he said.

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“We need permanence in macroeconomic stability – hence, the discussion with the Fund on a larger and extended program, but also we are going to focus on the growth aspects of it as well,” he said.

On his experience during negotiations with the IMF’s mission in Islamabad, Aurangzeb shared that the lender was “quite open” about how Pakistan can show economic discipline.

The PM “has been quite keen and vocal locally that we are going to enter into another programme, essentially to run with the structural reforms agenda”.

On creating fiscal space, Aurangzeb said “in the short term, the government intends to cut down on the leakages. We want decisions in the tax tribunals but more importantly, we need to bring the untaxed and under-taxed sectors into the net, and that is our medium-term agenda.”

He said that Pakistan was prioritising investment in key areas of agriculture, IT, mining, and energy to enhance productivity and ensure sustainable growth.

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“In the short-term, the IT and agriculture sectors present huge upsides, and these are all areas under our control,” he said.

“In the medium-term, I think the path that we are on in terms of metal and mining, I do think that is going to go beyond Reko Diq – there are going to be other projects like that, which are going to become real game-changers in Pakistan,” he said.

He invited international stakeholders to become partners in Pakistan’s journey towards economic prosperity and development.