• Finance minister will lead delegation to Washington for negotiations in mid-April
• Says global lender has been ‘very receptive’ to a ‘larger, longer programme’
• Reports ‘good progress’ on privatising PIA, outsourcing airports, aims for completion by July
• Encourages development of equity, debt markets to fund infrastructure projects, calls for reduced reliance on banks

KARACHI: Finance Minister Muhammad Aurang­zeb on Friday expre­ssed the hope for reaching a staff-level agreement (SLA) with the Inter­national Monetary Fund (IMF) by the end of the fiscal year (June 30), adding that there have not been any final discussions with the Fund yet.

During an appearance at the Pakistan Stock Exchange (PSX) gong ceremony, the finance minister said details of the deal would be discussed during the spring meetings, and he would lead a delegation to Washington around April 14 to 15.

Addressing the crucial issue of a new IMF programme, Mr Aurangzeb said the Fund has been “very receptive” to a “lar­ger and longer progr­amme” in his recent communications with them.

“There hasn’t been any final discussion or agreement with them, but it is our wish that by the time we wrap up this fiscal year, the SLA is reached,” he stated, adding that the previous staff-level agreement was important to ensure continuity of macroeconomic stability.

“We need the Extended Fund Facility (EFF) to execute the structural reforms programme, with the key word being ‘execute’, and not being bogged down in debate,” he said, perhaps with a subtle nod to past attempts to avoid Fund bailouts that did not fare well for the country.

“We know the what and the why… what is needed is to get into the implementation phase,” he remarked.

On privatisation, Mr Aurangzeb reported “very good progress” on privatising PIA and outsourcing airports, aiming for completion by July.

He reiterated the government’s belief that the private sector has to lead the country. “The government has no business being in business,” he said.

Felicitations and critique

Felicitations poured in for the finance minister as he arrived at the PSX on Friday morning. However, the celebratory mood was tempered with a dose of reality as industry leaders presented their requests to the finance czar.

The positive atmosphere stemmed from the recent record-high performance of the PSX and FTSE Russell’s decision to retain Pakistan in “secondary emerging markets” for the next six months.

“The performance of the stock market is the barometer of government policies,” said You Hang, a non-executive director on the PSX’s board. He emphasised the role that the government

plays in turning the PSX into “a real engine of capital growth and for viable investment”.

Farrukh Khan, the PSX’s managing director, was more direct in his requests. He highlighted the need for a fairer playing field for all investments and the challenges posed by Know-Your-Customer (KYC) policies.

He also critiqued the government’s removal of tax breaks for newly listed companies, arguing the lost revenue was a paltry Rs150 million compared to the potential gains from capital gains tax. “Please give us some reasonable and consistent tax policies,” Mr Khan urged. Mr Aurangzeb acknowledged the challenges and offered some initial responses.

He pointed to the improved economic outlook in 2024, fuelled by a strong agricultural sector with a bumper rice crop and a strong wheat harvest expected.

This focus on agriculture is understandable, given the sluggish performance of large-scale manufacturing, which grew at a meagre 0.35 per cent in the second quarter.

‘Plugging leaks’

Plugging leakages through improved execution was another key theme in Mr Aurangzeb’s message. He cited the Federal Bureau of Revenue’s (FBR) Track and Trace system as an example, emphasising the need for end-to-end digitisation for its effectiveness. He also highlighted the importance of resolving the backlog of Rs1.7 trillion in litigation pending in tribunals.

While acknowledging the need to expand the tax net to include the untaxed and undertaxed sectors, Mr Aurangzeb did not provide concrete details on how he would go about tackling this challenge.

Echoing earlier remarks by ex-minister Shamshad Akhtar, the former banker said that the banking industry and the PSX are “joined at the hip”. He called for a reduced reliance on bank financing and encouraged the development of equity and debt markets to fund infrastructure projects through public-private partnerships. He also mentioned the focus on monetising projects built in the first phase of CPEC and attracting Chinese export-oriented businesses to Pakistan in the second phase.

Asked about a proposal to resume trade with India, Mr Aurangzeb replied: “I cannot comment on that; this is ultimately the prime minister’s, the cabinet’s and the parliament’s decision. But no such thing has come on my table yet.”

Published in Dawn, March 30th, 2024