Islamabad, September 29, 2024 – Pakistan’s Finance Minister, Muhammad Aurangzeb, emphasized on Sunday that the nation’s economy requires profound structural reforms to ensure the newly negotiated International Monetary Fund (IMF) agreement becomes Pakistan’s final reliance on external financial assistance.
Addressing a press conference in Islamabad, alongside the Federal Board of Revenue (FBR) chairman, Aurangzeb underscored the urgent need to wage what he termed a “nuclear war” against the entrenched cash-based economy. This, he argued, is a crucial component of the necessary economic overhaul.
He remarked that the recently approved IMF deal brings some respite, but stressed that without transformational reforms across multiple sectors, Pakistan’s economic stability remains perilous. “This IMF arrangement must be our last,” the minister declared, signaling the government’s resolve to address the underlying issues that have repeatedly necessitated external bailouts.
On September 25, the IMF Executive Board approved a 37-month, $7 billion Extended Fund Facility (EFF) for Pakistan, a crucial lifeline for an economy struggling with deficits and financial mismanagement. The staff-level agreement was reached on July 12, setting the stage for this substantial financial package. Yet, Aurangzeb stressed that these measures will only offer temporary relief without meaningful reforms.
Central to the minister’s discourse was the need to aggressively target Pakistan’s vast undocumented, cash-driven economy. He reiterated that sustainable reforms could not be implemented unless the entire economy is thoroughly documented, stressing the necessity of formalizing informal sectors.
Aurangzeb highlighted recent signs of progress, including a current account surplus, which he attributed to robust remittance inflows and other favorable economic indicators. However, he noted that these gains would remain fleeting without substantial, long-term economic adjustments.
The finance minister also discussed plans to revamp the FBR’s tax audit capabilities, announcing the recruitment of 2,000 chartered accountants to strengthen tax enforcement. A new interface is being developed to monitor tax audits, aiming to prevent harassment of taxpayers while tightening the grip on under-reporting and tax evasion. “We must tackle under-filing in a methodical and professional manner,” Aurangzeb stressed, signaling that independent auditors will engage directly with stakeholders to ensure transparency.
Another critical issue the minister addressed was the backlog of dividends and profits owed to international investors. Aurangzeb assured that the government had initiated steps to resolve the concerns of foreign investors, affirming that dividends and profits that had been previously restricted were now being released.
Looking forward, Aurangzeb expressed optimism that the country’s inflation rate, which had started to decline, would further ease alongside a reduction in policy rates. He encouraged industry leaders to focus on the Karachi Interbank Offered Rate (KIBOR) rather than policy rates, asserting that the KIBOR was already in a favorable position.
In closing, the finance minister stressed that unless Pakistan enacts comprehensive reforms, it will continue to overburden its salaried class and manufacturing sector with taxes, underscoring the need for a fair and restructured tax system.
