Forex reserves to reach $9-10bn by end of June, says finance minister

Finance Minister Muhammad Aurangzeb said on Tuesday that Pakistan’s foreign exchange reserves would reach “anywhere between $9 to $10 billion” by the end of June.

Addressing the inaugural session of the seventh ‘Leaders in Islamic Business Summit’ in Islamabad, he said the expected position in June would be a “much better position in terms of where we were [in the previous year]”.

Pakistan’s forex reserves crossed the $8bn mark again last month after they fell below it in late February.

The minister further said the International Monetary Fund (IMF) should not be seen as “an end, but a means to an end”.

Regarding the current Stand-By Agreement (SBA), Aurangzeb deemed it important to have entered the programme: “That was absolutely critical that we did that as a country for a reason. There is no plan B. Plan B is unimaginable when you are in a situation where I said you are down to 15 days of import cover.”

The finance minister also recalled that the country was praised during his recent visit to Washington for showing the “necessary discipline needed to go through the programme”.

He stated that they initiated discussions with the Fund for a longer and larger programme for two reasons: to “bring permanence in this macroeconomic stability” and execute the economic structural reform agenda.

“I’ve kept saying that the country doesn’t need policy prescriptions; we know the what and why for the longest time, we just don’t do it,” Aurangzeb said, adding that the country needed to get into an “execution mode”.

“We need to move towards sustainability,” he stressed, warning that otherwise, reforms could not be implemented.

Aurangzeb also termed the energy equation a “huge priority” when it came to the sustainability of the reforms, whether they pertained to power or petroleum sectors.

Highlighting the tax challenges, the finance minister said, “One is a policy and enforcement gap and the other is obviously bringing in the undertaxed and the untaxed sectors into the net.”

He also noted that Rs1.7 trillion worth of litigation was pending with tax tribunals. “I repeatedly say we need timely decisions whether it’s a small company or a big country. Timely decisions and timely executions,” the minister underscored.

Aurangzeb stressed that the provinces and the Centre needed to work together to bring the sectors into the tax net.

‘Very clear roadmap needed to get out of IMF loans’

On privatisation, the finance minister reiterated his claim that the government had “no business in being in business”.

He urged all ministries and operating units to “step up” to stop the drag of state-owned enterprises (SOEs) and bring them towards privatisation.

The finmin also addressed the critical question of how to get out of the IMF programme, he said it is “to have a very clear roadmap”.

Furthermore, Aurangzeb said he saw “no reason to believe” that the IMF would not agree on the government’s privatisation agenda when they arrived in the country because ultimately, the Fund’s priorities aligned with Pakistan’s.

“I’m still hoping we will get into a staff-level agreement by the end of June or early July so we can move on to an end. IMF is means to an end, not an end in itself,” the finance minister said.

In March, IMF staff and Pakistani authorities reached an staff-level agreement for the second and final review, which was subsequently forwarded to the Fund’s Executive Board for final approval. Upon approval, Pakistan would have access to SDR 828 million (approximately $1.1bn).

Previous statements from both the IMF and Pakistani officials indicated that not only would the board convene on April 29, but it would also approve the release of the final tranche of $1.1bn under the SBA signed in June 2023.