———— Says only thing which can be a wild card is international Oil price
———— Maintains on large scale loan program
———— IMF director asserts ready to support Pakistan, reforms package more important than size of programme
———— Adds it is important to accelerate reforms and double down on their structure
DM Monitoring
WASHINGTON: Finance Minister Muhammad Aurangzeb has said that the government expected min-imal devaluation of the rupee following talks with the International Monetary Fund (IMF), a report by Bloomberg said.
The finance minister is currently in Washington to attend the spring meetings organised by the IMF and the World Bank (WB). He said that the rupee typically depreciates between 6% and 8% during a typical year.
“I don’t see the need for any step change,” Aurangzeb said, citing solid foreign exchange reserves, a stable currency, rising remittances, and steady exports.
He added that previous IMF loans to Pakistan had resulted in massive rupee devaluations, but this time, the outcome was expected to be different.
“The only thing which can be a wild card, although in our projections we should be okay, is the oil price,” he said. The minister also expressed Pakistan’s commitment to ensuring sustainable economic development and growth.
The finance czar pointed out the three key reform areas of taxation, energy, and privatization, adding that the agricultural sector performed better during the current fiscal year. The major economic indicators of Pakistan including remittances showed better results, the minister said and added that the government was committed to engaging in a broader expansion program with the IMF.
He further said that Islamabad expected an IMF delegation to visit the country in May for a staff-level agreement on the next loan programme by the end of June or early July.
Earlier, IMF Managing Director Kristalina Georgieva listed tax base, more contributions from the rich, and transparency in public spending among important issues to be solved by Pakistan to boost its economy for a follow-up programme.
Georgieva confirmed that Islamabad was in discussions for a follow-up programme to the SBA, but stressed it had important issues to solve.
“There are very important issues to be solved in Pakistan: the tax base, how the richer part of society contributes to the economy, the way public spending is being directed and of course, creating … a more transparent environment,” she said.
“The country is turning to the fund for potentially having a follow-up programme and there is a com-mitment to continue on this path,” Georgieva added, highlighting the pending issues that Pakistan still needed to address.
Earlier, The International Monetary Fund (IMF) is ready to support Pakistan and the package of re-forms is now more important than the size of a new programme, the fund’s Middle East and Central Asia director said on Thursday.
“I think what is important at this stage is to accelerate the reforms, double down on the structure of reforms in order to provide Pakistan with its full potential of growth,” Jihad Azour told a press confer-ence on the sidelines of the IMF 2024 Spring Meetings.
inance Minister Muhammad Aurangzeb is currently in Washington to attend the spring meetings or-ganised by the IMF and the World Bank (WB).
Aurangzeb stated earlier that Pakistan had initiated discussions with the Fund over a new multi-billion dollar loan agreement to support its economic reform programme, adding that the country will at least be requesting a three-year programme.
Aurangzeb has stated that the government does not expect significant rupee devaluation as part of negotiations with the IMF, according to a report by Bloomberg.
In an interview with Bloomberg published today, the minister said there would be no reason for the rupee to depreciate more than the range of about 6 per cent to 8pc seen in a typical year.
“Pakistan last devalued its currency in January 2023,” the report noted.
He said that while massive devaluations had accompanied some of Pakistan’s previous IMF loans and are often a condition of the crisis lender’s programmes around the world, nothing comparable should be necessary this time around.
“I don’t see the need for any step change,” Aurangzeb said, citing solid foreign exchange reserves, a stable currency, rising remittances and steady exports. “The only thing which can be a wild card, alt-hough in our projections we should be okay, is the oil price,” he said.
He said that the government was looking to bolster industries, including agriculture and information technology, hoping it would help push the nation’s growth above 4pc in the coming years.
The report further said that Pakistan faced about $24 billion in external financing needs in the fiscal year starting July, adding that Aurangzeb said Pakistan was in a “relatively good shape” to make those payments.
He further said that Pakistan expected an IMF mission to visit in May and would like to reach a staff-level agreement on the next loan by the end of June or early July, without specifying how much the country was seeking.
Earlier, Aurangzeb also held a meeting with US State Department officials Donald Lu and Elizabeth Horst, during which the latter reaffirmed Washington’s commitment to bolster ties between the two countries.
A statement issued by the finance ministry early on Wednesday said US Assistant Secretary of State Lu, and US Principal Deputy Assistant Secretary and Deputy Assistant Secretary for Pakistan Horst met the finance minister at the WB headquarters in the US capital, “reaffirming Washington’s commitment to bolster Pak-US ties”.
The ministry said that the meeting focused on upgrading economic partnerships, with an emphasis on alternate energy, agriculture, climate resilience and the tech industry.
Aurangzeb briefed the US diplomats about Pakistan’s reform agenda, which includes broadening the tax base, streamlining the energy sector and privatisation.
“Identified American investment opportunities in information technology, renewables, agriculture and minerals extraction. Pakistan pledges close collaboration with US International Development Finance Corporation & Exim Bank for mutual development,” the finance ministry said.
Earlier, the finance minister also met with the WB-IMF Pakistan Staff Association and briefed them about the country’s reform agenda.
The finance ministry said the meeting focused on the expansion of the tax base, energy sector re-forms, digitalisation, privatisation, promotion of public-private partnerships, and strict adherence to fiscal discipline to “revive Pakistan’s economy and drive sustainable growth”.
In a meeting with the IMF chief and some members of its board of governors, the finance minister had reaffirmed Pakistan’s resolve to carry out “aggressive reforms” to stabilise its economy.
These discussions were part of a meeting of Middle East and North Africa (MENAP) ministers and gov-ernors with IMF Managing Director Kristalina Georgieva held on Tuesday.
Aurangzeb “underscored aggressive reforms, including broadening the tax net, privatising loss-making SOEs, expanding social safety nets and facilitating the private sector,” his team said in a statement is-sued a day after the meeting.
The minister underscored the implications of geo-economic fragmentation on Pakistan and expressed gratitude to the IMF, multilateral development banks, and “time-tested sincere bilateral partners” for their unwavering support during these trying times.
He stressed the significance of reallocating a nation’s special drawing rights (SDRs) within the IMF to tackle economic hurdles effectively. Additionally, he highlighted the necessity of reassessing surcharge policies and giving precedence to the IMF’s Resilience and Sustainability Trust (RST) to address climate vulnerabilities.
The IMF’s RST has been in operation for more than a year, with the initial 17 countries securing com-mitments of financial assistance. Pakistan, identified as a low emitter yet severely impacted by climate change, is also seeking aid from this fund.
Advocating for a more proactive and responsive Global Financial Safety Net to address heightened risks, the minister applauded the IMF’s renewed focus on Capacity Building through Regional Capacity Development Centres (RCDCs).
The minister advocated for a proactive global financial safety net to address heightened risks and ap-preciated the IMF’s renewed emphasis on capacity-building through regional capacity development centres. He also stressed the importance of collaborative efforts for sustainable economic develop-ment.
Pakistan, in pursuit of another long-term package — its 24th thus far — from the IMF, has formulated a comprehensive economic recovery plan. This plan encompasses three primary components: taxa-tion, energy, and streamlining the privatisation of state-owned enterprises (SOEs), including PIA.
The IMF board is scheduled to convene on April 29 to deliberate on releasing the final tranche of its current programme with Pakistan. Subsequently, discussions between IMF staff and Islamabad re-garding the new package are anticipated to commence.
During Tuesday’s meeting, the IMF acknowledged Pakistan’s progress in meeting its conditions, while Pakistani officials advocated for a new plan tailored more specifically to Pakistan’s needs.
