Finance minister briefs Fitch Ratings on Pakistan’s IMF agreement, economic reforms
Finance Minister Muhammad Aurangzeb speaks during an interview with Reuters at his office in Islamabad on July 19, 2024. PHOTO: REUTERS
On Monday, Finance Minister Muhammad Aurangzeb updated Fitch Ratings representatives about Pakistan’s recent Staff-Level Agreement (SLA) with the International Monetary Fund (IMF) and outlined various measures aimed at bolstering the economy.
The briefing, conducted via Zoom, underscored the positive effects of the nine-month Stand By Agreement with the IMF on Pakistan’s macroeconomic health.
Earlier this month, the IMF announced an SLA with Pakistan for a $7-billion, 37-month loan program designed to foster stability and inclusive growth.
The new Extended Fund Facility (EFF), pending approval by the IMF’s Executive Board, also requires “timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.”
During the virtual meeting, Aurangzeb informed Fitch representatives that Pakistan plans to increase revenues by 1.5% of GDP in FY 2025 and by 3% over the subsequent three years. He also projected achieving a primary surplus of 1% of GDP for FY 2025.
Aurangzeb highlighted Pakistan’s $9.4 billion foreign exchange reserves, strong stock market performance, and the 12.6% inflation rate in the CPI for June 2024. He also noted a 7.7% increase in foreign remittances.
Discussing fiscal reforms, Aurangzeb emphasised the government’s efforts to broaden the tax base, reporting a substantial 30% rise in tax collection in FY 2024 compared to the previous year. He mentioned that over 150,000 retailers have registered as first-time taxpayers.
“The IT sector exports have surpassed USD 3 billion,” Aurangzeb stated, reiterating the government’s commitment to improving the tax-to-GDP ratio as part of ongoing fiscal consolidation efforts.
The conversation also covered ongoing reforms in the energy sector and State-Owned Enterprises, including privatisation and streamlining of federal government entities to enhance governance and efficiency.
Aurangzeb conveyed to Fitch the confidence multilateral institutions have in financing Pakistan’s projects. Fitch Ratings representatives commended the ambitious targets and fiscal measures adopted by Pakistan, acknowledging the improvement in the country’s economic indicators.
The meeting, led by Fitch Ratings Senior Director Thomas Rookmaker and Directors Asia Pacific Sovereign Krisjanis Krustins and Jeremy Zook, was attended by senior Finance Ministry officials.