• Aurangzeb says volume of rollovers will be same as last year
• Projects Pakistan’s financial needs to be between $3bn and $5bn over next three years
• Insists IMF board set to finalise staff-level agreement by end of the month

ISLAMABAD: Pakistan has secured commitments from China, Saudi Arabia and the United Arab Emirates to roll over debt for a year, a boost for Islamabad as it awaits final approval of a $7 billion, 37-month loan programme with the IMF.

Finance Minister Muhammad Aurangzeb told reporters in Islamabad after a parliamentary committee meeting that the volume of rollovers would be the same as last year, adding that Pakistan has $12bn in bilateral loans that have been extended for the past few years, according to a Bloomberg report.

Mr Aurangzeb also reiterated that the IMF’s executive board is set to convene by the end of this month to finalise a staff-level agreement (SLA) with Pakistan for the new loan programme aimed at ensuring stability and inclusive growth.

He emphasised that he communicates with IMF officials daily, refuting claims that Pakistan’s loan programme would be excluded from the next board meeting.

He projected Pakistan’s financial needs to be between $3bn and $5bn over the next three years, assuring that the government would manage these funds comfortably.

The minister said the government has also received offers from international commercial banks for concessional loans. “We are also reviewing these offers,” he said, adding that high-interest loans would be dismissed.

A major IMF demand is for Pakistan to ensure the rollover of its annual $12bn debt commitment to three key bilateral donors: Saudi Arabia, China, and the UAE. Saudi Arabia has already extended $5bn, China $4bn, and the UAE $3bn for one year.

Under the new IMF programme, these bilateral loans will be rolled over, although Mr Aurangzeb did not specify when the decision would be announced.

On the issue of independent power producers (IPPs), Mr Aurangzeb proposed appointing an adviser in China to discuss transitioning coal power facilities to local coal, a process expected to take two to three years. He stated that the government has hired an adviser in China for the issuance of Ponda bonds.

Senate briefing

During his briefing to the Senate Standing Committee on Finance and Revenue, Mr Aurangzeb noted signs of economic growth and increased investor confidence, leading Fitch to upgrade Pakistan’s rating.

He said the State Bank of Pakistan has reduced interest rates and that a rightsizing plan for ministries and divisions is underway, starting with five ministries.

A plan will be developed to address legal issues and assets that arise from the rightsizing. Former SBP governor Dr Ishrat Hussain and renowned economist Kaiser Bengali have already prepared a study on rightsizing. The minister assured the committee that the report will be provided to the committee.

The finance minister informed the committee that everyone would be subject to taxes and that the tax net had been extended to the retail, real estate, export and agriculture sectors. “Easier tax registration procedures are being adopted for businessmen,” he said.

He also highlighted government initiatives to reduce expenses, devolve provincial affairs ministries, and merge others, leaving the private sector to handle business operations.

Senator Farooq H. Naik queried the number of ministries to be abolished under the 18th constitutional amendment. Mr Aurangzeb responded that these ministries would be phased out in five groups, with the first phase involving a proposal to dissolve five ministries within the next few days.

The committee’s chairman, Salim Mandvi­wala, mentioned reports of a list of FBR officers being sent from the Prime Minister’s Office for removal. FBR Chairman Zubair Tiwana confirmed receiving monthly lists, ensuring that any action against officers is based on evidence.

Earlier, speaking at an event, Mr Aurangzeb stressed the need for effective projects to address climate change challenges, advocating for active participation and financing from private sector.

He noted that Pakistan was among the countries most affected by climate change and in 2022 floods, it suffered massive destruction and incurred losses estimated at $30bn.

Mr Aurangzeb said at the Geneva conference, various countries, bilateral and multilateral partners, and international organisations pledged over $9bn in assistance for Pakistan. However, the country did not receive the promised funds.

Published in Dawn, August 7th, 2024