ISLAMABAD: Finance Minister Muhammad Aurangzeb has said economic indicators are heading in the right direction and Pakistan is about to get assurances on external financing require for approval of IMF new program.
In his televised remarks today, he s upgradation of Pakistan’s ranking by two international agencies is also recognition of it.
The finance minister said the journey started about six months ago has started yielding positive results.
He pointed out that foreign exchange reserves stand over nine billion dollars, which are more than two months of import cover.
He said Rs 32 billion in refunds have been paid to exporters, marking a 46% YoY increase, to address liquidity issues. Referring to the gradual reduction in inflation, he said it has now come down to a single digit. With this, he said, the policy rate is also coming down, which will benefit all the sectors. The finance minister said the remittances in the month of July remained at an all-time high.
The finance minister also affirmed that the size of federal government will come down. He said there is a method to it and we are listening to the departments as well in this regard. Expressing confidence that the IMF board will timely approve Pakistan’s loan program, the finance minister said it will be made successful and last program. Over the past 18-24 months, any backlogs related to import letters of credit, import contracts, and dividend and profit remittances have been cleared. Furthermore, Fitch and Moody’s have upgraded Pakistan’s credit rating by one notch.
“We need to focus on achieving macroeconomic stability before pursuing growth. As we advance towards growth with import-driven demand, it impacts our balance of payments and increases the need for external financing,” he added. Last year, we raised taxes by 29%, and hence our tax-to-GDP ratio remains at 8.8%. The FBR has announced an PKR 89bn tax shortfall. This is due to 43% of sectors paying less than 1% in taxes, while salaried and manufacturing sectors are over-contributing. Wholesalers, distributors, and retailers need to increase their tax contributions. The impact of digitalization of tax collection will be visible from Sep’24.
The federal government will be streamlined, with six ministries reviewed—two of which are considered to be dissolved.
The staff-level agreement with the IMF was finalized in Jul’24. We are now in the final stages of securing external financing assurances, which are expected to be approved by the executive board soon.
