Islamabad, April 05: There is not current IMF review mission in Pakistan, which has any impact on the IMF program. There is no such mission is in Pakistan, only review mission for the budget process will arrive in Mid-May, says Finance Minister Muhammad Aurangzeb in a press conference.
He said that Pakistan is trying to have a solution for US duties that might benefit both Pakistan and USA, rather only penalizing Pakistan. He said Pakistan is reviewing the situation and US reservation regarding trade with Pakistan.
The working group and steering committee will soon give recommendations to the Prime Minister. Both challenges and opportunities are available for Pakistan on the issue of tariffs.
No package is under consideration for the local industry on the issue of US tariffs. Industry must be made competitive instead of being protected. No protection or package will be given to the industry. Currently, energy cost and financing are under control.
Trade Issues with US
America is also our largest trading partner. The Prime Minister has formed two committees on the US tariff issue. A working group has been formed under the chairmanship of the Secretary Commerce.
“We are seeing the US tariffs as a challenge and an opportunity. We are also considering tariff negotiations with the US, Finance Minister. A high-level delegation will go to the US with the approval of the Prime Minister”,
Pakistan is working on obtaining a trade package with the US. Pakistan is also working to deal with the effects of the US tariffs.
He said, “I want to talk about the fruits of economic stability. Foreign exchange reserves are increasing. Remittances have increased by 32 percent. Remittances are likely to reach a record $36 billion this year”.
Foreign exchange reserves will exceed $13 billion by June. Exports are also increasing. Efforts are being made to ensure that there is no obstacle in essential imports, said the minister.
Listed companies’ profits are increasing. It is necessary to facilitate existing investors for direct foreign investment (FDI).
CPI Inflation
Inflation is at a six-decade low of 0.7 percent. The common man should get its fruits. It is the government’s responsibility to pass on the reduction in inflation to the people. Inflation is being closely monitored, he added.
Moreover, the ECC will guide federal ministries and provincial governments in this regard. So that the people can get relief.
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Aurangzeb also said that the interest rate (mark-up rate) has come down from 22 percent to 12 percent. There is scope for further reduction in interest rates. Rates may be further reduced during this year.
Confidence on the system of the businesses and consumers has increased. Surveys coming in the last three to four months have been quite positive as an indication of the business confidence, he stated.
He said, “If local CEOs invest, then direct foreign investment (FDI) will also come. Local and foreign investment needs to be monitored too. New investors are also coming to the stock market”.
Spending on Eid Rs 870 bln
Hopefully new investors and supplies will come. Economic activity has increased on the eve of Eid-ul-Fitr. People have spent Rs 870 billion this year during Eid days. Last year, Rs 720 billion was spent in the same period. People’s spendings have increased in a year.
Sale of cement has also increased. With that imports of machinery have increased by 16%. Pakistan’s economic growth is likely to be 3% in the current fiscal year.
IMF Staff Level
An IMF delegation will come to Pakistan in mid-May. At present, govt is reviewing proposals and recommendations. At present, no IMF delegation is in Pakistan to discuss the budget.
However, the IMF delegation will come to Pakistan next month.
Staff level agreement with IMF has been reached. All IMF benchmarks have been met. Many things have happened for the first time in Pakistan’s history. Signing of the National Fiscal Package is unprecedented in the history of the nation.
The Minister added, “We want to move forward with everyone and we also want to keep everyone in consultation. That is why in the first six months success has been achieved.”
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IMF targets are being monitored on a monthly basis. The next tranche of $1 billion will be available with the approval of the IMF board. Negotiations on climate financing with the IMF were also successful.
“We have to make it successful together with the IMF, World Bank and ADB. The climate financing program has to be completed in 28 months. We will implement what we promised with the IMF”, said the minister.
“The Prime Minister and I have said that this is Pakistan’s own program. Structural reforms will have to be carried out. In the past, difficult policy reforms were not made by taking one tranche. Economic and macroeconomic stability has come before too”, Aurangzeb added.
The Prime Minister has said that this will be the last program of the IMF. However, the last program will be when difficult economic decisions are made.
Tax Reforms
Tax reforms are very important. The target is to take tax to GDP to 10.6 percent by June. Last year, it was 8.8 percent. Tax to GDP would have to be taken to 13.5 percent in three years.
This year, tax revenue increased by 32.5 percent. People’s lifestyles will be compared with data for the taxation purposes. From traders only Rs 413 billion were collected in tax. Which is Rs 189 billion more than last year. Moreover, Rs 105 billion rupees in tax collected from new tax filers.
The number of people filing tax returns has crossed 6 million. The process of submitting returns will be made easier for the salaried class. The salaried class will be able to file returns sitting at home. The issue of tax on the salaried class will be considered in the budget.
The Tax Policy Office will become operational soon. Experts from the private sector will be included in it.
Structural Reforms
Structural reforms are underway in the energy sector. The electricity tariff for the industry has been reduced by one-third. The privatization process will move forward rapidly. 24 institutions have been handed over to the privatization commission.
The national treasury is losing Rs 800 to 1000 billion annually due to losses of the government institutions. Efforts are underway to restore PIA operations for the UK after the European Union.
PIA Expressions of interest will be invited this month for the privatization of PIA. Round two of PIA privatization will be successful. Reforms are underway in government institutions.
“We will complete the review of the performance of government institutions by June. Operational expenses will start decreasing from the next financial year”, said the minister.
Govt Debt
The process of pension reforms has been started. This has never happened before, bleeding has been stopped for the first time.
Government loans are being reduced, maturity has been reduced to 3.5 years. This year, the cost of loans will be reduced by Rs 1,000 billion.
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The country’s economic development will be based on exports. One cannot protect the industry without competition. Every industry in the country will have to contribute to exports. Exports will have to be expanded and diversified.
Budget Consultations
Consultations have started for budget preparation since January. Budget proposals of various sectors are being reviewed. Various stakeholders are also consulted for the budget process.
Employees will be given relief in proportion to inflation in the budget.
When Pakistan’s global rating is single B, then country will approach the global capital market. Decision to send a high-level delegation of Pakistan to the US. Pakistan’s delegation will discuss the issue of tariffs with the US administration.
Crypto Market
The crypto market is the new economy of the world. Now cryptocurrency is being traded from the US to Bhutan. Pakistan cannot ignore the new crypto economy.
Pakistan is in the informal economy of crypto. It has come down from 10th to 7th place. Banks have exchanged data through blockchain. Crypto economy can be worked on only after being removed from the FATF list.
