Finance Minister Muhammad Aurangzeb on Saturday stressed the importance of a strong economic framework, noting that sustainable governance cannot rely solely on charity as he addressed concerns about Pakistan’s reliance on the International Monetary Fund (IMF).
“The reason is that we have not implemented the structural reforms needed to change the DNA of the economy,” the FinMin said while addressing the 3rd All Pakistan Chambers Presidents Conference at the Faisalabad Chamber of Commerce & Industry (FCCI).
He noted that a tax-to-GDP ratio of around 9-10% is not sustainable. “In a country of 240-250 million people, if only a certain percentage are paying their taxes progress cannot be made,” he maintained.
“Hospitals and education can run on charity, but the government cannot,” he said, adding that the government intends to raise the tax-to-GDP ratio to 13.5% to achieve economic sustainability.
Furthermore, he said that the government’s move to expand the tax base reduced the burden on the national treasury.
Aurangzeb reaffirmed that Pakistan’s economy is moving towards improvement, driven by key reforms.
He emphasised that a lower policy rate has also benefited business owners and ongoing economic stability measures were yielding positive results. He also reiterated that inflation has decreased to single digits, providing relief to the public.
The finance minister highlighted that recent tax reforms had significantly increased revenue collection.
Aurangzeb further underscored the need for public-private sector collaboration to drive economic growth, stating that working together is crucial for long-term progress.
The IMF recently confirmed that two of its missions will visit the country in the next two weeks; the first mission will focus on discussions regarding climate finance, while the second will carry out the first review of Pakistan’s progress under the $7 billion Extended Fund Facility (EFF), The News reported on Saturday.
Prime Minister Shehbaz Sharif-led government secured the approval of IMF’s Executive Board for a fresh loan programme in September 2024 which was followed by the disbursement of a $1.02 billion tranche.
With IMF officials in Pakistan, Islamabad will also have to evolve a broader consensus on the major contours of the next budget for 2025-26 with the lender’s staff.
If both sides fail to reach a consensus, the completion of the first review might be linked to the parliament’s approval of the budget.
As agreed, the first review and approval of a $1 billion tranche by the Executive Board of IMF is scheduled to be done by April 2025.
Earlier this week, FinMin Aurangzeb said that Pakistan was expecting $1 to $1.5 billion in climate funding from the IMF.
The second IMF mission would visit Pakistan in March for six-monthly review under the under $7 billion EFF, the finance czar said adding that all matters related to the global lender were fine.
The finance minister said the current account posted a $420 million deficit in January 2025, up 4% from $404 million in the same month last year.
However, he highlighted that the current account maintained a surplus of $682 million in the first seven months of FY25, a sharp turnaround from the $1.801 billion deficit in the same period last year.