ISLAMABAD: Pakistan’s Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, announced on Saturday that Pakistan plans to send a high-level delegation to Washington in response to changes in US trade policies and tariffs under President Donald Trump’s administration. The delegation’s primary objective will be to emphasize Pakistan’s commitment to a long-term strategic partnership with the United States.
“We are finalizing recommendations for the Prime Minister, and with his approval, we aim to send a high-level delegation to Washington to present our stance and demonstrate our intention to build a lasting partnership,” the Finance Minister stated during a press conference.
The government has formed two key committees—a steering group led by the Finance Minister and a working group headed by the Secretary of Commerce—to address trade challenges. These committees have been meeting regularly to transform these challenges into opportunities. “We view this as both a challenge and an opportunity,” Aurangzeb added, underscoring the government’s proactive approach.
The Finance Minister emphasized that Pakistan seeks a win-win situation for both nations in the medium to long term, highlighting the US as Pakistan’s largest trading partner, particularly in exports.
Economic Stability and Growth Strategy
In terms of economic stability, the Minister outlined Pakistan’s strategy to drive growth through export-led, production-led, and private sector-led initiatives. The focus is on increasing foreign exchange reserves, boosting business confidence, and implementing structural reforms.
Pakistan has achieved macroeconomic stability, which Aurangzeb described as “basic hygiene” for further economic development. He noted that foreign exchange reserves have been steadily rising, supported by a 32% increase in remittances year-on-year during the first two months. Exports have also remained strong, showing around 7% growth.
By June, Pakistan expects foreign exchange reserves to surpass $13 billion. On the domestic front, inflation has dropped to 0.7%, the lowest in six decades, signaling positive economic trends. The government has implemented an institutional mechanism to manage inflation, ensuring its impact remains minimal.
Aurangzeb also pointed out that the decline in mark-up rates and Kibor is benefiting industries. Business, investor, and consumer confidence have all shown signs of improvement, as indicated by various reports.
Structural Reforms and Privatization
The government is pushing forward with structural reforms across taxation, energy, and privatization. A total of 24 state-owned enterprises (SOEs) have been handed over to the Privatization Commission, and the relaunch of Pakistan International Airlines (PIA) is slated for this month. Economic activity has surged, with government spending rising to 870 billion rupees, up from 720 billion rupees last year.
Aurangzeb stressed the importance of export-led growth across all sectors, citing the auto industry’s recent move to begin exporting.
IMF Relations and Financial Outlook
Pakistan successfully concluded its six-month review with the International Monetary Fund (IMF) under the Extended Fund Facility (EFF). The country is set to receive an additional $1 billion in the upcoming IMF tranche, once approved by the IMF board. Negotiations for the Resilience and Sustainability Fund also continue, as part of the country’s ongoing fiscal programs.
The Finance Minister stated that the IMF program is critical for Pakistan’s economic health, though it may be the last if difficult policy choices are implemented.
On the structural reform front, Pakistan is on track to increase its tax-to-GDP ratio to 10.6% by the end of June, compared to 8.8% last fiscal year. Over time, the goal is to gradually reach 13.5%. Tax revenue is expected to increase by 32.5% year-on-year, with a significant expansion in the tax base as the number of tax filers doubled from 2 million to 4 million by October 31. Additionally, tax returns have now surpassed 6 million.
Digital innovations in customs enforcement, such as the track and trace system, have already resulted in a 16% increase in revenue. This system is currently being expanded to sectors like cement, beverages, and cotton.
Energy Sector Reforms
The government has made significant strides in the energy sector, with a one-third reduction in electricity tariffs for the industry, a change welcomed by the business community. Additionally, restructuring efforts are underway in state-owned entities like NTDC and DISCOS to ensure long-term sustainability.
Debt Management and Government Restructuring
On the debt front, the government has extended the maturity of its debt to 3.5 years, leading to projected savings of Rs. 1 trillion in debt servicing costs. The Finance Minister also mentioned ongoing efforts to restructure and streamline over 400 government departments. The first two phases of this restructuring have been approved, and further phases will be presented to the cabinet soon, with a full analysis expected by June to impact the upcoming budget.
Conclusion
Pakistan’s government is prioritizing structural reforms, trade partnerships, and economic stability to ensure long-term growth. The high-level delegation to the US aims to further strengthen bilateral ties, while the country’s ongoing fiscal measures are expected to lead to greater financial stability and growth in the coming months.
