Finance Minister forecasts economic growth amidst challenges

WEB DESK: Caretaker Finance Minister Dr Shamshad Akhtar delivered an optimistic outlook for Pakistan’s economy during her keynote address at the IPO Summit 2024 held in Karachi on Saturday.

Despite ongoing challenges, Dr Akhtar projected a growth rate of 2-2.5 per cent in the current fiscal year.

Highlighting the progress in various economic indicators, Dr Akhtar emphasised significant strides in macroeconomic, exchange rate, and financial stability.

She anticipates a rebound in growth, with agriculture expected to lead at 5.6 per cent and the industrial sector at 2.5 per cent for the fiscal year.

The caretaker minister acknowledged the Federal Board of Revenue’s (FBR) efforts to implement additional reforms in tax collection. Despite the struggle, Dr Akhtar revealed a positive projection, expecting tax collection to touch Rs10 trillion.

Dr Akhtar attributed the fiscal achievements to the adoption of austerity measures, leading to the generation of a primary surplus. Notably, the substantial deficit on the current account has transformed into a surplus.

Addressing the importance of managing both fiscal and current accounts, Dr Akhtar stated, “Until and unless you have two of these accounts manageable, the fiscal and current accounts, we will not be able to reduce the interest rates.”

The caretaker minister underscored the role of manageable interest rates in fostering capital market growth. She emphasised that “capital markets cannot thrive under very high interest rates.”

On the external front, Dr Akhtar reported an increase in foreign exchange reserves to $9.1 billion, attributing it to the International Monetary Fund (IMF) tranche and multilateral flows.

The quick disbursement of funds from organisations like the World Bank and Asian Development Bank, coupled with the IMF’s second tranche release, contributed to this surge from the initial $4 billion at the beginning of their term.

Dr Akhtar expressed confidence in the foundations laid for attracting foreign investments, foreseeing high dividends for incoming governments. She stated, “The economic recovery process has boosted business confidence and market sentiment,” citing the bullish performance of the Pakistan Stock Exchange (PSX) and increased foreign portfolio inflows as indicators.

In her address, Dr Akhtar also delved into the global financial scenario, noting a tectonic shift in the IPO landscape post-pandemic. Asia Pacific, led by China, Japan, and Southeast Asia, now dominates global deals and proceeds, surpassing the North American IPO scene.

The caretaker finance minister urged a shift from the traditional bank-driven financing mindset, highlighting the need for transparency, effective governance, and full disclosures. She emphasised the evolving dynamics in IPOs, with healthcare, consumer staples, and renewable energy emerging as attractive sectors for investors.

Dr Akhtar concluded her address by asserting, “Nothing is stopping us (Pakistan)” and encouraging a departure from outdated lending practices in favour of embracing modern financial approaches aligned with global market trends.

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