Federal Minister for Finance and Revenue Muhammad Aurangzeb brushed off concerns over the government’s plans to bring the largely under-taxed agriculture sector into the revenue net, stressing that Islamabad’s hand has now been “forced”.

“I am grateful to the chief ministers for agreeing to legislate taxation on the agriculture sector,” said Aurangzeb as he addressed state media at the Karachi Chamber of Commerce and Industry on Tuesday.

“However, neither you (industrialists), nor the International Monetary Fund (IMF) is willing to accept that the government will be able to achieve this.

“Our hand has now been forced because we have reached a level where if we don’t expand the net and bring the under-taxed, untaxed sectors into the economy, we are at the end of the road,” he said.

‘China will help secure IMF loan’

Aurangzeb said industrialists and the IMF “were skeptical” regarding the imposition of taxes on retailers.

“Every segment has to play its part. If we don’t, we will keep going back to the industrialists and the salaried class for more taxes,” he said.

Talking about the cut in the key policy rate, Aurangzeb maintained that “this is the prerogative of the central bank.”

“I think it’s a step in the right direction. My personal view is looking at the inflation rate, even if it ticks up a little bit there is still room for the central bank to reduce it on a gradual basis,” he said.

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

Aurangzeb admitted that a high interest-rate regime, alongside the element of taxation and energy cost, are issues that need to be addressed.

“The path of growth can only be achieved through the permanence of macroeconomic stability,” he said.

“The Prime Minister has maintained that this will be the last IMF programme,” he said.

Fault lies within: to fix the economy, look inward

Aurangzeb said that the structural issue of Pakistan’s economy is “as soon we accelerate the growth rate, we face balance of payments issue”.

He added that export-led growth is the only way forward, citing agriculture and IT as potential sectors of growth.

Pakistan is looking for external financing avenues: Aurangzeb

The finance minister admitted that it is a “failure of the government” for not maintaining fiscal discipline “due to which the banks continue to lend to the government”.

“Ultimately, it has to be the private sector, which has to lead this country. It has to be private sector credit, which has to come in.

“Therefore, I have told the banks not to go towards directed lending but continue to lend farmers SMEs on a cash-flow basis,” he said.