Finance Minister briefs Fitch Ratings on IMF agreement, economic reforms

ISLAMABAD: Finance Minister Muhammad Aurangzeb provided an update to Fitch Ratings representatives on Pakistan’s recent Staff-Level Agreement (SLA) with the International Monetary Fund (IMF).

The SLA is designed to bolster Pakistan’s economic reform agenda and includes measures aimed at stimulating economic growth, according to a statement from the Finance Division.

During a virtual meeting conducted via Zoom, the finance minister outlined the anticipated benefits of a nine-month Stand-By Agreement with the IMF on Pakistan’s macroeconomic indicators. Earlier this month, the IMF announced that it had agreed on a $7 billion, 37-month loan programme with Pakistan, intended to support economic stability and inclusive growth.

However, this Extended Fund Facility (EFF) requires approval from the IMF’s Executive Board and timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.

Aurangzeb informed Fitch Ratings that Pakistan’s goals include increasing revenues by 1.5 per cent of GDP in fiscal year 2025 and by 3 per cent over the subsequent three years. He also mentioned that a primary surplus of 1 per cent of GDP is targeted for FY 2025.

The meeting, led by Fitch Ratings Senior Director Thomas Rookmaker, along with Directors Asia Pacific Sovereign Krisjanis Krustins and Jeremy Zook, was attended by senior officials from the Finance Ministry.

Aurangzeb highlighted several positive economic indicators: Pakistan’s foreign exchange reserves stand at $9.4 billion, the stock exchange is performing well, and inflation in the Consumer Price Index (CPI) was recorded at 12.6 per cent in June 2024. Additionally, foreign remittances have risen by 7.7 per cent.

The minister also emphasised the government’s fiscal reforms, including a 30 per cent increase in tax collection for FY 2024 compared to the previous year. He noted that over 150,000 retailers have registered as new taxpayers and reported that IT exports have surpassed USD 3 billion.

Aurangzeb reiterated the government’s commitment to enhancing the tax-to-GDP ratio and advancing fiscal consolidation measures. The discussion also covered reforms in the energy sector and State-Owned Enterprises, including privatisation and streamlining federal government entities to enhance governance.

Fitch Ratings representatives acknowledged the ambitious targets and fiscal measures implemented by the Pakistani government and recognised improvements in economic indicators.

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