Monday May 27, 2024

Aurangzeb eyes fresh staff-level agreement with IMF by end of this fiscal year

The minister said Pakistan wanted to continue with the new programme for at least three years

By Our Correspondent
March 30, 2024
This screengrab taken on March 5, 2024, from Pakistan Expo 2020’s YouTube video posted on October 5, 2021, shows Muhammad Aurangzeb speaking about investment opportunities. — YouTube/PakistanExpo
This screengrab taken on March 5, 2024, from Pakistan Expo 2020’s YouTube video posted on October 5, 2021, shows Muhammad Aurangzeb speaking about investment opportunities. — YouTube/PakistanExpo

KARACHI: Finance Minister Muhammad Aurangzeb has said the country is going towards a big programme with the International Monetary Fund (IMF) and hoped that the Staff-Level Agreement (SLA) for the purpose would be reached by June-July this year.

Addressing Gong ceremony at Pakistan Stock Exchange (PSX) and later on talking to the media, he said no final discussion and agreement had been made with the IMF for the next programme so far. He said they would meet in Washington next month during the spring meetings and carry on the dialogue on it. “We need the EFF [Extended Fund Facility] to execute the reform agenda,” he added.

The minister said Pakistan wanted to continue with the new programme for at least three years and they would have to take strong structural reforms.

In response to a question regarding trade with India, the finance minister said he would not comment on it, as it would be a decision of the prime minister, cabinet and parliament, but it was not brought up at his table.

He said the target for tax collections was Rs9.4 trillion. However, there was a track-and-trace system, but leakages also existed. There were litigations of Rs1.7 trillion in taxes as there were cases in the tribunals, while there were around Rs3 trillion other leakages of taxes. There was Rs500 billion theft in the power sector alone. “If 50 per cent or 2 to 2.5 trillion rupees are collected from these leakages, there would be a lot of recoveries,” he added.

About digitalisation of the Federal Board of Revenue (FBR), the federal minister said they would be hiring a consultant for the purpose in April. The process would reduce loopholes and ultimately corruption. “We have to go end to end with the digitalisation,” he added.

He said those already paying taxes could be burdened with further taxes, but it was not sustainable. Thus, there was a need to curb leakages of Rs3tr revenue and bring the under-tax sectors in the loop. He said it was time to focus on exports instead of subsidy-led imports, as that model was not sustainable.

He said that required collective cooperation and synergy of the whole government ministries in the process of privatisation of the State Owned Enterprises (SOEs), with especial reference to the PIA, as it involved many departments. The government should not have any business in the business, which should be led by the private sector. The other loss-making SOEs should also be brought in the pipeline of privatisation, he said. Besides it, outsourcing of power distribution companies (DISCOs) would also be handled on a priority basis. “We will monitor progress towards it on daily and weekly basis,” he promised.

Aurangzeb said that inflation had increased on a month-on-month basis because of a food products demand in the month of Ramazan, while other inflation is expected to come down in the coming months, which would have an impact on the policy rate.

He said that policy rate and exchange rates were handled by the State Bank of Pakistan (SBP), which was an independent institution. However, he said the currency rate was around its actual rate.

In terms of growth rate, he said the agriculture sector had shown five per cent growth because of a bumper rice crop, which would continue the growth while wheat was also expected to add to it. A per acre increase in wheat yield to 40 maunds from 36 maunds could help out the economy and the country. He said agriculture and technology were two leverages. He also stressed the need to support the small and medium enterprises (SMEs). He said the government was planning to provide relief to the poor by further expanding the Benazir Income Support Programme (BISP). The federal minister said that this year, the country was expecting $3.2 billion in the exports of software, which could be enhanced and there was no bar on it. He said they were not in the process of waiting to take action. They were already doing structural reforms, which were beneficial in the long run.

He said that PSX was a crucial partner in bringing about reforms in the country and they needed to work to increase number of listed companies, as currently there were only 524 listed companies. The Securities & Exchange Commission of Pakistan (SECP) and the finance ministry would provide full support to the PSX in its endeavours of market efficiency and transparency.

The minister said that Chinese support was crucial not only in the stock market but also on other forums as well. He said under phase-2 of the China-Pakistan Economic Corridor (CPEC), there was need that China invested in export-oriented sectors in Pakistan into the special economic zones. The CPEC phase-2 was monetisation of the Phase-1, he added.

Earlier, Chairperson PSX Dr Shamshad Akhtar, in her address through an online link, welcomed the federal minister, while MD and CEO PSX Farrukh H Khan also addressed the Gong ceremony.

Separately, Finance and Revenue Minister Muhammad Aurangzeb held a meeting with SBP Governor Jameel Ahmad on Friday to discuss and develop strategies for improving financing and lending to key sectors in order to promote economic growth and development in Pakistan.

The meeting was held during the finance minister’s visit to Karachi, and the attendees included the heads of several prominent banks. “The primary agenda of the meeting was to discuss and strategize increase in financing and lending to priority sectors to stimulate economic growth and development in Pakistan,” said a statement, issued by the Press Information Department.

During the meeting, Aurangzeb provided a comprehensive briefing on the current economic situation of the country, highlighting the government’s ongoing efforts to promote economic stability, fiscal discipline, and sustainable growth. He emphasised the critical role of the banking sector in supporting the government’s development agenda and urged banks to increase financing and lending to priority sectors, namely agriculture, SMEs, and Information Technology (IT).

He also requested the Pakistan Banks’ Association (PBA) to lead a task force comprising representatives from the banking sector, government, and relevant stakeholders, with the primary objective to accelerate financing in the priority sectors and devise actionable strategies to overcome the existing challenges and bottlenecks hindering the growth of these vital sectors.

The SBP governor expressed his support for the minister’s initiatives and emphasised the SBP commitment to facilitating an enabling environment for banks to increase lending to priority sectors. He highlighted the SBP role in providing regulatory support, policy guidance, and financial incentives to encourage banks to expand their financing activities in alignment with the government priorities.

The meeting concluded with a mutual understanding to strengthen collaboration between the Ministry of Finance, SBP, and the banking sector to promote inclusive and sustainable economic growth in Pakistan. Aurangzeb reiterated the government’s commitment to working closely with the banking sector to address the financing needs of priority sectors and ensure effective implementation of the proposed strategies and initiatives.