Aurangzeb unveils economic plan

WASHINGTON:

Federal Minister for Finance and Revenue Muhammad Aurangzeb, heading a Pakistani delegation to the International Monetary Fund (IMF) and World Bank 2024 Spring Meetings in Washington, on Tuesday highlighted the country’s road map to address economic challenges and boost the economy towards sustainable development. During an interactive session with the Atlantic Council Center for Geoeconomics and the South Asia Center titled “Opportunities and Challenges for Pakistan’s Economy to 2024 and Beyond,” he outlined key measures such as raising the tax-to-GDP ratio, the digitization of the Federal Board of Revenue (FBR), reform of state-owned enterprises (SOEs), boosting exports, boosting remittances, improving the business environment and attracting foreign direct investment.

Describing Pakistan’s current economic landscape, Aurangzeb noted that the country had entered a better position this year compared to last year, mainly due to the nine-month Stand-By Arrangement (SBA), which brought macroeconomic stability. He highlighted positive indicators such as 5% growth in agriculture, improved performance in the services sector, reduction in inflation from 37-38% to around 20-22% and stable exchange rates.

“So all of that got us going in the right direction. Now, we will promote it from here [for which] we need, first of all, permanence in macroeconomic stability,” adding that the government had begun discussion with the IMF on the larger and expanded program that would help put the economy on the path to sustainable growth.

The finance minister was of the view that “timely decisions and timely executions” were key aspects of the functioning of any institution. He explained that Pakistan does not need too many policy prescriptions as “we know what and why, not for years but for decades. We know that we need to focus on the fiscal aspect, tax to GDP, investment to GDP, increasing exports, regulating the cyclical debt and speeding up the privatization agenda. These are some things that my predecessors had signed with the Fund. It’s time to start moving into the execution phase now,” he said.

On revenue generation, Aurangzeb highlighted short-term measures to reduce revenue collection leakages and speed up revenue court rulings. He highlighted the medium-term agenda of bringing tax-free and under-taxed sectors into the tax net, highlighting ongoing efforts to digitize the tax system to minimize human intervention. He underlined the importance of transparency and customer experience in restoring trust in the tax authority.

The finance minister also referred to the need to control expenditure and develop infrastructure with public-private partnerships at both the federal and provincial levels. Citing a World Bank study, he highlighted the potential for a 26% increase in GDP per capita by addressing human capital issues, depending on the availability of fiscal space. He further discussed the operation of a ‘one window’ mechanism for business in Pakistan, highlighting its benefits for both domestic and foreign investors.

During a meeting with Pakistani-American businessmen and technology entrepreneurs, Aurangzeb urged them to tap into opportunities in key sectors such as agriculture, information technology (IT), mining and energy in Pakistan. He lauded the role of the Pakistani diaspora in socio-economic development and emphasized their importance as bridge builders between Pakistan and the United States.

Highlighting various government initiatives to improve the business environment and attract foreign investment, the finance minister specifically cited Pakistan’s potential in the IT sector, hosting over a million freelancers and ranking third globally in the freelance market. He highlighted efforts to simplify business regulations and give foreign investors the freedom to repatriate profits and receive special protection.

In a separate meeting with members of the US Pakistan Business Council (USPBC), Aurangzeb acknowledged the role of the US corporate sector in strengthening economic ties between the two countries. He reiterated the government’s commitment to implement necessary reforms for long-term economic growth and stability, including the Investment Policy 2023 aimed at attracting more foreign investment in various sectors.

He said the new policy would streamline business regulations, give foreign investors the freedom to repatriate their overseas earnings in their own currency and ensure special protection. He also briefed them about the government’s initiatives to digitize the economy and widen the tax base for sustainable economic growth. USPBC members commended Pakistan’s efforts to improve the ease of doing business and assured the Minister of their continued support to enhance bilateral trade and investment cooperation.

He also discussed Pakistan’s vulnerability to climate-induced disasters during a meeting with Climate Vulnerable Forum (CVF) Secretary General Mohamed Nasheed, former President of Maldives. The finance minister emphasized the need for developed economies to step up their efforts to provide additional financing, technology transfer and capacity building assistance to developing countries, including Pakistan. He also highlighted Pakistan’s proactive role in rallying global support for the Loss and Damage Fund at COP 28.

Published in The Express Tribune, April 17^u2024.

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