Federal Minister for Finance and Revenue, Muhammad Aurangzeb on Saturday hinted at revisiting the National Finance Commission (NFC) Award, once the loan from the International Monetary Fund (IMF) is approved.
State-run news agency APP reported that the finance minister said, that if the loan is approved, Islamabad would revisit its NFC award that allocates revenues between the federation and the provinces.
Pakistan is requesting a “larger and longer” multi-billion-dollar loan programme from the IMF and discussions are underway with the Fund’s officials, the finance minister said, without specifying how much the nation was trying to secure.
Aurangzeb, who is in the US capital with his team to participate in the IMF and World Bank’s meetings and request a new financial package, said once the mission is back in Islamabad, we are going to agree on the priorities and the principles.
“I believe it is Pakistan’s programme. It is not an IMF programme. It is Pakistan’s programme and it is supported, assisted and funded by the IMF.”
“What’s the size, and the reality and where we are, it’s premature to talk about that. We have our own views and we’ll share them with IMF. But I would rather leave it to the joint meetings in terms of the size and the duration of the programme,” Aurangzeb told a group of journalists and think-tanks.
Asked by TRT World if Islamabad would revisit its National Finance Commission (NFC) award, the allocation system of revenue between the federation and the provinces, once IMF approves the new loan programme, Aurangzeb said, Pakistan needs to review it in the context of the 18th amendment where a lot of stuff has been devolved to the provinces.
“It is a discussion which we will have with the provinces in terms of either expenditure sharing or requesting them to incentivise to bring up the tax base, because the reality is, after the 18th amendment and the NFC award, some of the sectors which need to be brought in a much bigger way into the tax net are actually provincial markets,” he said.
“Whether it is agriculture, real estate or property construction, we can help support systems, but it is for them to actually go ahead and do it,” he said, adding he has already engaged with the chief ministers of Punjab and Sindh provinces with respect to starting the dialogue.
Pakistan signed a short-term agreement with the IMF in 2023. Pakistan is seeking a new bailout of up to $8 billion when the current one of $3 billion expires, he added.
Earlier, Aurangzeb ruled out any further significant rupee devaluation. Speaking at a round table meeting with the Bloomberg team in Washington, he said Pakistan’s solid reserves, stable currency, and growing exports support against rupee devaluation.
The finance minister said that his country was ramping up support for industries, agriculture and IT to boost national growth above four percent in the coming years.
Formal request for a new loan
In a related development, Pakistan’s finance team has made a formal request for a new loan program ranging between $6 to $8 billion during a meeting with the IMF officials in Washington.
The proposed bailout package aims to address various economic needs, including funding for the Extended Fund Facility (EFF) program and climate financing initiatives. The exact size of the potential loan program is expected to be determined during upcoming negotiations scheduled for next month.
An IMF team is anticipated to visit Pakistan in mid-May to engage in detailed discussions and assess the country’s economic situation.
The finance minister has expressed optimism regarding the possibility of reaching a staff-level agreement with the IMF by late June or early July, highlighting the urgency and importance of securing financial assistance to address Pakistan’s economic challenges.
Engagements with chiefs of int’l financial institutions
Finance Minister Aurangzeb on Saturday briefed the chiefs of international financial institutions about the initiatives of the government of Pakistan for economic reforms and development.
He held a meeting with the World Bank’s Regional Vice President for South Asia Martin Raiser who expressed satisfaction that the new Country Partnership Framework (CPF) between Pakistan and the World Bank would be finalized soon.
Muhammad Aurangzeb underlined the government’s reform thrust in the areas of energy, taxation and state-owned enterprises (SOEs), highlighting the pursuit of both short and long-term goals in these crucial sectors.
Referring to his earlier meetings with the senior leadership of the World Bank, he stated that the Bank’s focus on climate change, digitalization, and human capital development aligns well with the priorities of the government.
The finance minister highlighted the government’s vision to realize Pakistan’s true economic potential in terms of sustainable economic growth.
He stressed the importance of timely completion of development projects and the realization of intended impacts and outcomes, emphasizing the need for effective implementation and monitoring.
He also briefed Mr. Raiser on the role of the Special Investment Facilitation Council (SIFC) as a one-window facility for investment promotion and facilitation. Both sides agreed on the need for reforms in the agriculture sector, water management, and wastewater treatment.
The finance minister also met with Brent Neiman, Deputy Under Secretary for International Finance at the US Department of Treasury, on the sidelines of the IMF and World Bank Spring Meetings in Washington DC.
The Finance Minister briefed Mr. Neiman on Pakistan’s positive economic indicators in the wake of the Stand-By Arrangement (SBA) signed with the International Monetary Fund (IMF). He informed that the government has prioritized reforms in taxation, energy sector, and state-owned enterprises (SOEs).
He underscored the United States’ significance as Pakistan’s largest trading partner and a key source of remittances and Foreign Direct Investment (FDI).
He briefed Mr. Neiman on the role of the Special Investment Facilitation Council (SIFC) in facilitating foreign investment into the country. The Finance Minister welcomed his visit to Pakistan after the presentation of the budget and assured full support in this regard.
Muhammad Aurangzeb held a meeting with Jin Liqun, President of the Asia Infrastructure Investment Bank (AIIB), and discussed Pakistan’s economic trajectory and explored avenues for enhancing cooperation in infrastructure development. During the meeting, the finance minister briefed the AIIB President on Pakistan’s positive economic indicators, including improving foreign exchange reserves, a stable currency, declining inflation rates, and a surging stock market.
He highlighted the renewed institutional and foreign inflows into the market, on the back of the successful 9-month Stand-By Arrangement (SBA) with the International Monetary Fund (IMF).
The finance minister informed Mr. Jin Liqun that Pakistan was looking to enter into a larger and extended program with the IMF, building upon the progress achieved under the SBA. He identified broadening the tax base, fixing the energy sector, and undertaking state-owned enterprise (SOE) reforms as key priorities of the government.
The minister expressed gratitude for AIIB’s support in the aftermath of the devastating 2022 floods, particularly the co-financing of US$ 250 million for the RISE-II program of the World Bank. He reaffirmed Pakistan’s commitment to continue working closely with AIIB on the infrastructure development of the country. The minister appreciated AIIB’s additional commitment of US$ 500 million in project assistance and acknowledged the satisfactory progress on project implementation and disbursements.
The finance minister also met with Mr. Makhtar Diop, Managing Director of the International Finance Corporation (IFC). In the meeting, Finance Minister briefed Mr. Diop on Pakistan’s positive economic indicators, including improving foreign exchange reserves, stable currency, declining inflation rates, and a surging stock market. He highlighted the renewed institutional and foreign inflows into the market, bolstered by the successful 9-month Stand-By Arrangement (SBA) with the International Monetary Fund (IMF).
He informed the IFC Managing Director that Pakistan looked forward to entering into a larger and extended program with the IMF.
Muhammad Aurangzeb identified broadening tax reforms, fixing the energy sector, and undertaking state-owned enterprise (SOE) reforms as key priorities of the government.
He expressed gratitude to IFC for its support in the outsourcing of the Islamabad airport, which will be followed by similar initiatives in Lahore and Karachi.
He noted with satisfaction the uptick in IFC activities in the country and requested the corporation’s support in assisting the government in shifting its Public Sector Development Program (PSDP) to PPP mode.
Other engagements of the finance minister included a luncheon meeting with the Country Management Unit (CMU) of the World Bank, participation in the High-level Closed-door Roundtable on Financial Markets Access: Challenges and Opportunities organized by the Middle East and Central Asia Department (MCD), IMF and meeting with Mr. Andrew Torre, Regional President, VISA.
The finance minister is leading Pakistan’s delegation in the IMF/World Bank’s 2024 Spring Meetings being held in Washington DC. Other delegates include Imdadullah Bosal, Finance Secretary, Dr. Kazim Niaz, Secretary Economic Affairs Division, Jameel Ahmed, Governor of State Bank of Pakistan and Adil Akbar Khan, Senior Joint Secretary, Economic Affairs Division
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