ISLAMABAD, Sep 29 (Alliance News): Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, reaffirmed the government’s commitment to implementing structural reforms aimed at transforming Pakistan’s economy into an export-driven model for sustainable growth.
Addressing a press conference alongside Chairman of the Federal Board of Revenue (FBR), Rashid Mahmood Langrial, on Sunday, the minister emphasized the need for fundamental changes to ensure long-term economic stability.
“We need to adopt a new approach,” the minister remarked, adding, “If we are saying this is the last IMF program, we must fundamentally change the DNA of our economy.”
Homegrown Economic Reforms
Aurangzeb identified two main reasons for seeking the Extended Fund Facility (EFF) from the International Monetary Fund (IMF): ensuring macroeconomic stability and executing critical reforms under a homegrown economic agenda.
He explained that macroeconomic stability serves as the foundation for achieving sustainable growth. Without a strong foundation, he noted, it would be impossible to build a robust economy.
“Macroeconomic stability is not an end in itself but a means to an end,” he remarked. The minister stressed that stability achieved in the first quarter of the fiscal year needed to be made permanent to foster inclusive growth.
While the IMF’s program mandates structural reforms, the minister insisted that these reforms were not just external demands but necessary for Pakistan’s economic progress. “Pakistan is at a defining moment, and we are clear about the direction we are heading in,” he said, underscoring the need for collective ownership of the economic reform process.
Export-Led Economic Model
Aurangzeb highlighted that Pakistan’s current import-led economy has long been a barrier to sustained growth. He explained that whenever the country’s growth rate exceeds 4%, Pakistan runs into balance-of-payment issues due to increased demand for imports. This often forces the country to seek external loans.
The minister stressed the urgent need to transition to an export-led economic model. “Even our loans and foreign direct investment (FDI) must be export-driven,” he said.
He also referenced recent talks with investors in the electric vehicle industry, emphasizing that manufacturing and exports must be carried out from Pakistan.
“Our export-to-GDP ratio is stuck at 10%. We must move it forward,” he asserted. He pointed to a 29% year-on-year increase in exports as a positive sign that government measures were yielding results.
Positive Economic Indicators
Aurangzeb shared optimistic economic indicators, including a significant decrease in inflation, which has dropped from 38% to single digits. This decline, coupled with a reduction in the policy rate and a decrease in the Karachi Interbank Offered Rate (KIBOR), has had a favorable impact on industry.
“Large corporations are now borrowing at KIBOR minus rates of around 15% to 16%,” he said.
He also revealed that the government had rejected borrowing through Treasury Bills and Pakistan Investment Bonds (PIBs), signaling confidence in the country’s improved fiscal situation.
This, he said, would encourage the banking sector to lend to the private sector, which would lead the way in economic growth.
On the external front, the minister noted improvements in Pakistan’s credit ratings and expressed optimism that the country could achieve a B or B- rating in the near future.
The Pakistan Stock Exchange (PSX), he added, was also performing well, setting new records.
Aurangzeb highlighted foreign investments from companies such as Aramco, Gamber, and BYD as further evidence of growing investor confidence in Pakistan’s macroeconomic stability.
Commitment to Reforms and Taxation
The minister reaffirmed the government’s commitment to reducing the size of the federal government.
He noted that six ministries have already been abolished or merged, and five more will be reviewed soon. These changes, however, would require amendments to the Civil Servant Act of 1973.
Aurangzeb also highlighted significant progress in tax reforms. The number of tax return filers has more than doubled from 1.6 million last year to 3.2 million this year.
The government has abolished the terms “non-filers” and “under-filers” and is actively targeting tax evasion, which is estimated at Rs 1.3 trillion.
He emphasized the need for Pakistan to document its economy and move away from a cash-based system. “If we want to be part of the G20, we need to document our economy,” he said, adding that Pakistan’s actual economic size could be as high as $700 billion, even though it is currently reported at $325 billion.
The government is also introducing measures to combat smuggling and increase tax revenue through the implementation of digital checkpoints. This, he said, could result in an additional Rs 700 billion in tax revenue.
Short-Term Pain for Long-Term Gain
Aurangzeb acknowledged that some of the reform measures may cause short-term pain, but he argued that these tough decisions were necessary for putting Pakistan on a sustainable growth path. “There is no other option,” he said.
In closing, the minister identified two major challenges facing Pakistan: rapid population growth at 2.55% and the growing threat of climate change. Both issues, he said, require urgent attention and comprehensive planning.
