Islamabad, September 3, 2024 — In a resolute declaration on Tuesday, Finance Minister Muhammad Aurangzeb categorically affirmed that the government will not backtrack on the Tajir Dost Scheme, a key initiative aimed at integrating wholesalers, retailers, and distributors into the formal economy.
Addressing the nation in a televised message, Aurangzeb underscored the government’s unwavering commitment to sustaining economic reforms, broadening the tax base, and streamlining the federal government to foster sustainable growth and macroeconomic stability.
A Call to Action for Potential Taxpayers
Aurangzeb made an earnest appeal to potential taxpayers, urging them to step forward and contribute to the nation’s economic resurgence. Emphasizing the significance of the Tajir Dost Scheme, he encouraged wholesalers, retailers, and distributors to play a proactive role in the country’s economic uplift. The minister assured that the government is dedicated to simplifying the tax system and accommodating the recommendations of the business community to enhance compliance and ease of doing business.
However, the finance minister was unequivocal in his stance that the government would not reconsider its decision to implement the Tajir Dost Scheme. “One thing I want to be very clear,” Aurangzeb asserted, “this is not going to be taken back, because if we do this, the other sectors, who are annoyed, would go in further difficulties.” He emphasized that retracting the scheme would be counterproductive, potentially exacerbating challenges for other economic sectors already under strain.
Commitment to Economic Reforms and Rightsizing
Reaffirming the government’s resolve to advance its reform agenda, Aurangzeb highlighted the critical importance of expanding the tax base and rightsizing the federal government as foundational steps toward achieving macroeconomic stability — a concept he referred to as “basic hygiene” for sustained economic growth. He pointed out that currently, 43% of economic sectors are contributing less than 1% in taxes, a situation that has significantly curtailed the tax-to-GDP ratio to a meager 8.8%. The minister stressed the urgent need to elevate this ratio to over 13% to ensure fiscal health and economic resilience.
As Chairman of the High-Powered Committee on Rightsizing of the Federal Government, Aurangzeb also detailed plans to streamline government ministries and autonomous bodies. He announced that six ministries have been tasked with preparing an implementation plan for rightsizing within two weeks, taking into account their employees, resources, properties, and ongoing litigation matters. “Once the program is executed, other ministries will undergo the same process,” he stated.
Legislative Changes and Macroeconomic Stability
The finance minister revealed that the government is prepared to introduce legislative changes to the Civil Servant Act of 1973, with the support of coalition partners, to facilitate the rightsizing process and ensure its smooth execution. This initiative, he noted, is part of a broader strategy to enhance government efficiency and reduce fiscal waste.
Aurangzeb also shared promising economic indicators, highlighting the positive impact of government measures implemented over the past six months. He reported that Pakistan’s foreign exchange reserves have exceeded two months’ worth of import cover, standing at over $9 billion, while the currency remains stable and the twin deficits, especially the Current Account Deficit, are under control. “These positive developments have allowed us to clear all backlogs from the past 18 to 24 months, including import LCs, contracts, dividends, and profit remittances that had previously stalled,” he explained.
Inflation and Remittances on a Positive Trajectory
The finance minister also noted a significant reduction in inflation, which had peaked at 38% but has now decreased to 9.6% in September 2024, down from 23.7% last year. He expressed optimism that as inflation continues to decline, the policy rate will follow suit, providing much-needed relief to the economy, particularly the industrial sector.
In a positive note on remittances, Aurangzeb reported that the inflow of remittances reached an all-time high in July 2024, reflecting the resilience and confidence of overseas Pakistanis in the country’s economic direction.
International Recognition and Future Prospects
Highlighting the international acknowledgment of Pakistan’s economic progress, Aurangzeb mentioned that two leading rating agencies, Fitch and Moody’s, have both upgraded Pakistan’s credit rating by one notch. “This is an external recognition that the economy is being steered in the right direction,” he remarked.
Despite a shortfall of approximately Rs. 98 billion in revenues, the minister pointed out that the government has paid around $132 billion in refunds to exporters, demonstrating a 44% year-on-year growth.
On the matter of external financing, Aurangzeb disclosed that Pakistan has already signed a Staff Level Agreement (SLA) with the International Monetary Fund (IMF) and is in the advanced stages of securing an agreement from the IMF executive board. He expressed hope that this would be the last IMF program, provided that structural reforms are implemented and the country is set on a sustainable economic trajectory.
As Pakistan navigates its path to economic recovery, Aurangzeb’s categorical statements reflect a government steadfast in its commitment to reforms, resilience, and growth.
