Aurangzeb unveils economic plan

Outlines measures to boost tax revenue, attract FDI during Washington visit

WASHINGTON:

Federal Minister for Finance and Revenue Muhammad Aurangzeb, leading a Pakistani delegation at the International Monetary Fund (IMF) and World Bank 2024 Spring Meetings in Washington DC, on Tuesday highlighted the country’s roadmap to address economic challenges and propel the economy toward sustainable growth. During an interactive session with the Atlantic Council’s Geo-Economics Centre and South Asia Centre titled “Opportunities and Challenges for the Pakistani Economy through 2024 and Beyond,” he outlined key measures including increasing the tax-to-GDP ratio, digitalising the Federal Board of Revenue (FBR), reforming State-Owned Enterprises (SOEs), boosting exports, enhancing 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, largely due to the nine-month Stand-By Arrangement (SBA) programme, which brought macroeconomic stability. He highlighted positive indicators such as 5% growth in agriculture, improved performance in the services sector, a decrease in inflation from 37-38% to approximately 20-22%, and stable exchange rates.

“So all of this has moved us in the right direction. Now, we will take it forward from here [for which] we need, in the first instance, permanence in the macroeconomic stability,” adding the government had initiated discussion with the IMF on the larger and extended programme that would help put economy on the path of sustainable growth.

The finance minister was of the view that “timely decisions and timely executions” were key aspects of running any institution. He explained that Pakistan does not need too many policy prescriptions as “we have known what and why, not for years but decades. We know we have to focus on the tax-aspect, tax-to-GDP, investment-to-GDP, increasing exports, getting circular debt in order and accelerating the privatisation agenda. These are some things my predecessors had been signing with the Fund. It is time for us to start moving into the execution phase now,” he said.

Regarding revenue generation, Aurangzeb underscored short-term measures to reduce revenue collection leakages and expedite tax tribunal decisions. He stressed the medium-term agenda of bringing untaxed and under-taxed sectors into the tax network, highlighting ongoing efforts toward digitalising the tax system to minimise human intervention. He underscored the importance of transparency and client experience in restoring trust in the tax authority.

The finance minister also addressed the need for expenditure control and infrastructure development with public-private partnerships at both 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, contingent upon fiscal space availability. Additionally, he discussed the operationalisation of a ‘single-window’ mechanism for business in Pakistan, underscoring its benefits for both domestic and foreign investors.

During a meeting with Pakistani-American businessmen and tech entrepreneurs, Aurangzeb urged them to capitalise on opportunities in key sectors such as agriculture, information technology (IT), mining, and energy in Pakistan. He praised the Pakistani diaspora’s role in socio-economic development and highlighted 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 mentioned Pakistan’s potential in the IT sector, hosting over a million freelancers and ranking third globally in the freelance market. He underscored efforts to simplify business regulations and provide foreign investors with 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 US corporate sector’s role in strengthening economic ties between the two countries. He reiterated the government’s commitment to implementing necessary reforms for long-term economic growth and stability, including the Investment Policy 2023 aimed at attracting more foreign investment across various sectors.

He detailed that the new policy would streamline business regulations, grant foreign investors the freedom to repatriate their profits abroad in their own currency, and ensure special protection. He also briefed them on the government’s initiatives to digitize the economy and broaden the tax base for sustainable economic growth. The USPBC members praised Pakistan’s efforts to enhance the ease of doing business and assured the Minister of their continued support to boost 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 the Maldives. The finance minister highlighted the need for developed economies to increase their efforts in providing additional financing, technology transfer, and capacity-building assistance to developing countries, including Pakistan. He also highlighted Pakistan’s proactive role in garnering global support for the Loss and Damage Fund at the COP 28.

Published in The Express Tribune, April 17^th, 2024.

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