Pakistan's finance minister calls for structural reforms to achieve sustainable GDP growth

Pakistan's Finance Minister Muhammad Aurangzeb has said that structural changes in the economy are needed to ensure consistent gross domestic product (GDP) growth of four to five percent.

Speaking to reporters on Sunday, at the conclusion of his weeklong trip to Washington D.C., Aurangzeb argued that sustainable economic growth can only be achieved by boosting exports rather than relying on foreign loans. Aurangzeb was in D.C. to attend the annual meetings of the International Monetary Fund (IMF).

Responding to a question by Nukta, Aurangzeb brushed aside the projection made by theh IMF in its latest World Economic Outlook that Pakistan's GDP growth will not exceed 4.5% even by 2029.

“We have performed beyond their projections before and the results can vary both in a positive and negative manner,” he added, expressing optimism about the future.

'Fruitful' meetings

Accompanied by State Bank Governor Jameel Ahmad and Pakistan's Ambassador to the U.S. Rizwan Saeed Sheikh, Aurangzeb described his meetings with financial institutions as "fruitful".

He noted that American banks are willing to finance Pakistani projects, highlighting the positive reception of Pakistan's macroeconomic stability.

Aurangzeb revealed that Pakistan's import cover has improved to three weeks and that the World Bank is willing to provide grants separate from the IMF program.

“We need to stay the course on the IMF program. We are on a good track, but now the talks are around multilateral institutions."

On regional trade, he expressed support for facilitating trade with India, Pakistan's neighbor and rival.

Privatizing state enterprises

He also discussed efforts to expand the tax net, indicating that new policies are making it more difficult for non-filers to evade taxes. Aurangzeb suggested fresh legislation to limit non-filers' ability to buy or sell property.

On privatizing key state-owned institutions, including flag carrier Pakistan International Airlines (PIA) and the airport in the capital, Islamabad, Aurangzeb said the government's interference in running these businesses is counterproductive.

He said that the technical assessment of privatizing PIA and the Islamabad airport is expected to be finalized by November 2024, followed by airports in Lahore and Karachi.

Improved indicators

In support of these efforts, Governor Ahmad reported that Pakistan's foreign reserves have risen to $11 billion through market interventions by the Central Bank, not through debt.

He added that recent profits from the state bank have allowed Pakistan to reduce some domestic debt, with the country’s total external debt decreasing by $2 billion.

As of June, Pakistan's total debt has dropped to 67% of GDP, down from 75% the previous year, he said.

23rd IMF program

Pakistan has entered into agreements with the IMF 23 times since the late 1980s, reflecting its ongoing economic challenges.

The latest program, initiated in July 2022, is a 39-month Extended Fund Facility (EFF) arrangement aimed at addressing severe fiscal imbalances, stabilizing the economy, and restoring external financial stability.

This program includes measures to enhance tax collection, reduce the budget deficit, and implement structural reforms in key sectors. As part of the agreement, Pakistan has committed to adjusting energy tariffs and phasing out unproductive subsidies.