Interest rates set to decline as inflation slows: Finance Minister

March 14, 2024 (MLN): With the slowdown in inflation rate, Pakistan's Finance Minister Muhammad Aurangzeb anticipates a gradual reduction in interest rates, signaling a potential easing of financial pressures for businesses.

Aurangzeb, a former CEO and President of Pakistan's largest bank, in a recent televised interview, provided a cautiously optimistic outlook on the nation's economy.

The banker assumed the role of Finance Minister at a time when the country is facing one of its worst crises.

With the current International Monetary Fund (IMF) loan program nearing its end in April, the country urgently needs a longer and larger new program to meet its high debt obligations.

Aurangzeb has stressed the importance of fiscal self-reliance, advocating for a shift away from the unsustainable practice of continually rolling over loans from bilateral countries.

He noted that while friendly nations are willing to assist, they prefer investment over direct aid.

To raise finances and ease pressure on the balance of payment position, Aurangzeb revealed intentions to issue panda bonds in the Chinese market in the upcoming fiscal year.

To note, Panda bond is a Chinese renminbi-denominated bond from a non-Chinese issuer, sold in People's Republic of China.

Meanwhile, Aurangzeb reassured that the government would not impose additional tax burdens. Instead, the focus will be on widening the tax base.

Sectoral Focus: IT and Agriculture

The Finance Minister highlighted the strategic importance of the IT sector, pointing to Pakistan's robust community of IT freelancers, the second-largest globally, as a cornerstone for future economic growth.

However, he warned that without competitive advancements, the sector might lag behind internationally.

In agriculture, Aurangzeb highlighted the potential for rapid transformation, citing this year's $2 billion rice export.

He proposed that by boosting wheat yields from 36 to over 40 maunds per acre, Pakistan could transform into a net exporter of wheat, further strengthening its agricultural sector.

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