Cannot defer reform agenda anymore, says Aurangzeb

Federal Minister for Finance Muhammad Aurangzeb on Thursday said the government would “move forward” with structural reforms in key sectors as it cannot “defer this agenda” anymore.

Addressing the ground-breaking ceremony of the Head Office Building of the Securities and Exchange Commission of Pakistan (SECP), the finance minister reiterated that under the umbrella of the International Monetary Fund (IMF), the government would move forward with structural reforms in taxation, energy, State-Owned Entities (SOEs) and privatisation.

“We have to move forward because we do not have the space and the room anymore to defer this agenda,” he said.

Last month, authorities in Islamabad reached a staff-level agreement (SLA) with the IMF for a $7-billion, 37-month loan programme aimed at cementing stability and inclusive growth.

Talking about the economy, Aurangzeb said that announcements including the Fitch upgrade and the State Bank of Pakistan’s (SBP) decision to lower policy rate, “are direct manifestations of the macroeconomic stability that we are following, and the economic team will continue to move forward with this agenda”.

On Monday, the Monetary Policy Committee (MPC) of the SBP reduced the key policy rate by 100 basis points, taking it to 19.5%, its second successive decision of a cut.

Moreover, Fitch Ratings, a global credit rating agency, also upgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’.

Addressing the gathering, Aurangzeb stressed on the importance of macroeconomic permanence.

“Stabilisation will lead to growth thus we have to bring permanence,” he said.

On privatization of SOEs, Aurangzeb said the government has said that all insurance companies under the public sector would move in the direction of being handed over to the private sphere.

“There is no reason whatsoever that in the government we hold on to those entities or functions, even if they are strategic functions.

“Going forward, the entire insurance sector should be managed and held by the private sector.”

He said that the country need to pursue export-led growth and FDI. “If we want to borrow externally, then it should be for those projects, which in turn produce foreign currency for the country.”

As we go forward, equity and debt market have to come to the fore so that the government can diversify its funding base, Aurangzeb said.

The finance minister has faced intense criticism from Pakistan’s salaried citizens over high taxation, while cement, flour millers, petroleum dealers, and other industries have also been protesting several budget measures.

While Pakistan did manage to clinch yet another IMF bailout, the government machinery is also under pressure over high energy tariffs and lack of economic growth.