Finance Minister Aurangzeb hoping for new IMF deal by end of fiscal year

Finance Minister Muhammad Aurangzeb on Friday expressed hope for reaching a Staff-Level Agreement (SLA) with the International Monetary Fund (IMF) by the end of the fiscal year (June 30), adding that there have not been any final discussions with the Fund yet.

The $3 billion standby arrangement with the global lender expires on April 11, and the two sides reached a staff-level agreement regarding the disbursal of the final tranche of $1.1bn last week. The minister has previously voiced the government’s intention to seek “larger and longer” bailout package from the IMF.

During the gong ceremony at the Pakistan Stock Exchange, the finance minister elaborated that the details of the deal would be discussed during the spring meetings in Washington where the delegation led by him would go around “14th to 15th April”.

The finance minister elaborated that they had requested to “enter a larger and longer programme” during the SLA discussions to which the IMF was receptive, adding that the size of programme hasn’t been decided yet.

“We need the Extended Fund Facility (EFF) to execute the structural reform agenda,” he said, “The operative word here is execution, not getting into debating clubs or policy prescriptions. We have known the what and the why for decades.”

Aurangzeb added that the request to enter the EFF will be further formalised in spring.

“But there hasn’t been any final discussion or agreement with them but it is our wish that by the time we wrap up this fiscal year, the SLA is reached,” he stated, adding that the previous SLA was important to ensure continuity of macroeconomic stability.

Over implementing the reforms, Aurangzeb elaborated, “And we have gone into the implementation stage in the last few weeks with a two-pronged strategy.”

“There is one short-term to medium-term [phase], which is closing the gaps, stemming the leakages and the losses,” he said, adding “And the second one is phasing in the structural reforms in the medium to longer-term.”

He gave the example of the Federal Board of Revenue (FBR)’s challenge of stemming leakages: “We have the Track and Trace system — we have the functionality. [However], the implementation has been lax therefore the operational effectiveness is just not there.”

Regarding other leakages, he mentioned that roughly Rs1.7 trillion of litigation was languishing in tribunals, adding that in conjunction with Law Minister Azam Nazeer Tarar and Attorney General for Pakistan (AGP) Mansoor Usman Awan, the tribunals have been told to make decisions in the next three months for timely execution.

“Concurrently, we start bringing the undertaxed and untaxed sectors into the fold along with the digitalisation effort which has been done in some verticals,” he said that the end-to-end digitalisation was necessary to bring transparency and a “superior client experience”.

He said that would restore trust and confidence in this institution and also “deal with some aspects of the social contract”.

Furthermore, Aurangzeb reiterated that the private sector had to lead the country while the government’s job was to “provide policy framework and policy continuity” and that it had “no business being in business”.

“We need both equity and debt capital markets to step up, and help in the privatisation process,” he said, adding that some infrastructure projects had to be brought under the context of public-private partnership.

The finance minister also stressed on the importance of “Chinese investment and partnership”.

He stated, “I am very clear that increased cooperation between the Pakistan Stock Exchange and Chinese exchanges will not only help us here in Pakistan in deepening, widening the capital markets based here, but also in executing CPEC phase 2.”

Trade with India not yet brought to table

Asked about a proposal for resumption of trade with India during his talk with reporters, Aurangzeb replied: “I cannot comment on that; this is ultimately the prime minister’s, the cabinet’s and the Parliament’s decision. But no such thing has come on my table yet.”

As for the FBR’s digitalisation agenda, he said that the Request for Proposal (RFP) for a “world class consultant” would be issued on April 8th and that the consultant hired would be someone who has experience in emerging markets such as Pakistan.

“God willing, by the end of April we will be appointing that consultant,” the finance minister said.

Previously, the minister had apprised the FBR officials of his top priority plan hovering around two pillars — documentation of the economy and end-to-end digitalisation of the tax system.