IMF schedules 1st official program review for February

January 14, 2025 (MLN): The International Monetary Fund’s (IMF) mission for the first official review of the program is expected to arrive between mid and late February.

This was said by Finance Minister Muhammad Aurangzeb in a televised interview with Bloomberg’s program, The Asia Trade.

The extended duration of the IMF program underscores the nation's commitment to macroeconomic stability, focusing on structural reforms and fiscal sustainability, he further said.

One major component of the plan is tax reforms aimed at widening and broadening the tax base, he added.

The finance minister shared that Pakistan’s tax-to-GDP ratio rose to 10.8% in December.

“I would say, that we are well on our way to achieve that target. Not only because IMF is saying that, but from my perspective, the country needs to get into that benchmark to make our fiscal situation sustainable,” he said.

Aurangzeb reiterated that the government is committed to “widen and deepen the tax base”.

In July last year, Pakistan inked a 37-month, $7 billion Extended Fund Facility (EFF) with the Washington-based lender aimed at cementing stability and inclusive growth.

In September, the IMF Executive Board approved the EFF, leading to Pakistan receiving the first tranche of Special Drawing Rights (SDR) 760 million, equivalent to $1.03bn, from the Washington-based lender.

On macroeconomic indicators, the finance minister said that the government’s GDP growth target for this fiscal year stands at 3-3.5%, which it intends to increase to 6% in the next 2-3 years.

“Our focus is to fundamentally change the DNA of the economy to make it export-led,” he said.

Sectors previously outside the tax net, such as agriculture, retail, real estate, and wholesale, will be brought into the system.

Additionally, the government is prioritizing increasing tax compliance, working to eliminate any leakages in the system.

Regarding growth, Pakistan is in a phase of stabilization and is now prioritizing "sustainable growth," differing from past attempts that led to economic imbalances due to the country’s import-dependent economy.

The finance minister acknowledged that growth exceeding 4% in the past has often led to balance of payment problems and necessitated returning to the IMF.

However, the government is determined to shift the economic model to an export-led one.

Pakistan's $7 billion IMF program, approved for a 37-month period in September 2024, is poised to shape the country’s economic trajectory.

“We have had credit rating upgrades from all three rating agencies over the last 8-10 months, but the reality is, we need to get back into a single B category, to get back into the international capital market,” he said.

“I am very keen and the country is very keen to tap the Panda bonds and the Chinese capital market,” he said. “We have been remiss as a country not to tap into it previously.”

The finance minister informed that China International Capital Corporation Limited (CICC) has been appointed as an advisor on this.

“We are trying to follow the Egyptian model that is to get some level of credit enhancement.”

Aurangzeb said the country is preparing to launch Panda bonds in the next six to nine months and it aims to raise $200-250mn from the inaugural issue.

Aurangzeb departed for Hong Kong on Saturday to participate in the 18th Asian Financial Forum (AFF), where he will hold meetings with heads and senior officials of key Asian financial institutions.

During his visit, Aurangzeb will meet prominent members and leaders of the Pakistani community residing in Hong Kong.

The AFF serves as a key platform for Asia’s finance, business and influential government leaders to share insights and solutions to key issues impacting the global economy from an Asian perspective.

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