Finance Minister Hopes for Final IMF Bailout, Outlines Economic Reforms
Finance Minister Muhammad Aurangzeb expressed optimism that Pakistan’s upcoming International Monetary Fund (IMF) programme will be the country’s last. Speaking at the CFA Society of Pakistan’s 21st Annual Excellence Awards, Aurangzeb emphasized the importance of sustained reforms to avoid further IMF assistance in the future. He cautioned that failure to maintain these reforms could lead to the need for a 25th IMF package.
His remarks come as Pakistan awaits approval of a $7 billion, 37-month loan agreement with the IMF, which was initially agreed upon in July. The IMF’s executive board is set to review the agreement on September 25, with Pakistan on the agenda for approval. A key precondition for the approval was the requirement for Islamabad to secure $2 billion in external financing from bilateral and commercial lenders.
Pakistan’s external debt includes $5 billion owed to Saudi Arabia, $4 billion to China, and $3 billion to the United Arab Emirates (UAE) in the form of cash deposits.
Focus on Reforms and Economic Stability
During his speech, Finance Minister Aurangzeb stressed the need for macroeconomic stability and highlighted the importance of transitioning from an import-dependent economy to an export-driven model. He acknowledged that Pakistan has experimented with various economic strategies in the past, but none have produced the desired results.
Aurangzeb also announced that new federal government employees will be required to contribute to a defined-contribution pension scheme as part of the government’s broader efforts to reduce financial burdens on the state.
Mini-Budget and Tax Reforms
The government is preparing to introduce a mini-budget aimed at generating approximately Rs650 billion in revenue. This will primarily be achieved through a crackdown on tax evaders and increasing the general sales tax (GST) on various sectors, including real estate and tractors.
Additionally, as part of the conditions set by the IMF, the government has agreed to increase property valuation tables for real estate in 42 cities by the end of September 2024. The revised rates will be notified by the Federal Board of Revenue (FBR) in the coming weeks.
The mini-budget is expected to be introduced after gaining approval from Prime Minister Shehbaz Sharif and the federal cabinet. The government will decide whether to present the money bill in parliament or issue a presidential ordinance after consulting with its political allies, particularly the Pakistan Peoples Party (PPP).
The finance minister’s commitment to economic reforms and his hopeful outlook on the IMF programme signal a push for long-term stability, while the upcoming mini-budget reflects efforts to bolster the country’s revenue streams.
