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Express Tribune
28-01-2025
- Business
- Express Tribune
'Govt needs to be cautiously optimistic'
Listen to article ISLAMABAD: The International Monetary Fund (IMF) on Tuesday advised Pakistan to stay on course and show some patience amid growing demand from the private sector to open up the economy to create jobs and reduce unemployment. Pakistan "needs to stay on course, remain committed to programme objectives and at the same time needs to have a little bit of patience," remarked Mahir Binici, IMF Resident Representative in Pakistan. Binici was speaking during the "Dialogue on Economy", organised by the Pakistan Business Council (PBC). The resident representative, who recently took over, said that Pakistan had to be optimistic cautiously and had patience to stay on course in order to deliver on reforms so that people could benefit from that. The government has been facing increasing pressure from within and the business community to further ease monetary policy, open imports and let the economy grow. However, many voices are opposing such demands as the country is still passing through a phase of relative stability and its economic fundamentals are weak. Economic growth in the first quarter stood at only 0.92%, which was far lower than the optimism created by the government. "There is no automatic switch from stability to growth and we need to change the DNA of the economy to avoid any new balance of payments crisis after any new spurt of economic growth," said Finance Minister Muhammad Aurangzeb at another session during the dialogue. He did not promise any relief for the salaried class but admitted that "salaried persons were paying taxes disproportionate to their incomes". He appeared helpless in reducing tax rates, saying it was not possible until other sectors started paying their due share in taxes. Mahir Binici said that Pakistan's economic recovery had been in place and "we expect that the positive growth momentum will continue in this and the next fiscal year." Inflation has receded and a significant progress has been the improvement in the external sector. The SBP is building external buffers, Binici added. The finance minister anticipated a further cut in interest rate following the easing of inflation in January. He said that the Karachi Inter-bank Offered Rate (Kibor) was already trading below the 12% policy rate. The foreign exchange reserves of $13 billion by June this year would provide comfort to international credit rating agencies to improve Pakistan's rating to B, he projected. Mahir Binici said that unlike the typical IMF programmes that started with a crisis, the crisis situation and the stabilisation were already partially addressed during the last nine-month programme. The objective of the new programme was to maintain and cement economic stability with structural reforms, said the resident representative, adding that focus should be on reform agenda rather than achieving stability without adjustment. The objective is to have stronger, sustainable and more inclusive growth. Sustainable growth could be achieved through reducing distortions, ending state interventions and removing a variety of concessions, which would "enable us to have more resilient growth," said the IMF local head. Speaking at another session, Pakistan's former ambassador to the United States, United Kingdom and United Nations Dr Maleeha Lodhi said that without economic strength, Pakistan could not play a major role on the global front. Pakistan had to navigate its foreign policy challenges in a global geopolitical environment that was marked by five important features – growing multipolarity but weakening multilateralism, US-China competition, rising East-West tensions, increasing importance of middle powers and advanced technology, she added. She said that Pakistan could not be a middle power until it had economic strength and made technological advancements. There were six priority areas for Pakistan's foreign policy in the months and years ahead, said Lodhi. They are relations with China and the US, while avoiding getting into the crosshairs of their confrontation, although that might be easier said than done, dealing with an increasingly testy relationship with Afghanistan, managing the adversarial relationship with India, balancing ties between Saudi Arabia and Iran, and keeping relations with the EU on a positive track. She said that China remained Pakistan's top foreign policy priority. While relations remain strong, a number of problems need to be resolved. "China's three main concerns are lack of political stability in Pakistan, security of Chinese personnel working here and the public manner in which requests are made for loan rollovers and debt relief as this has implications for lending to other countries," she said. Regarding the US, Maleeha Lodhi said that the big unknown was how relations with Trump's America would shape up especially as Pakistan's geopolitical importance had diminished for Washington after its exit from Afghanistan. She said that America's top strategic priority was to contain China but Pakistan could not be part of any anti-China coalition. Another limiting factor is Washington's growing strategic and economic relationship with India, in a strategy to project Delhi as a counterweight to Beijing. "The challenge is to find space for Pak-US relationship between these two strategic realities. This will not be easy as Pakistan doesn't figure in Trump's foreign policy priorities," she added. With India, resumption of formal dialogue is not in sight but a backchannel is needed to manage tensions. At the moment, there is no framework for crisis management, said the former ambassador.
Express Tribune
28-01-2025
- Business
- Express Tribune
$20b WB lending may be insufficient
Listen to article ISLAMABAD: The World Bank Vice President for South Asia, Martin Raiser, emphasised on Tuesday that the $20 billion lending will be insufficient to achieve the 10 years' development goals, and Pakistan will have to mobilise more resources to overcome its challenges. In a statement issued after the week-long visit by Raiser to Pakistan, the regional vice president appeared to strike a balance between the optimism created by the $20 billion worth Country Partnership Framework and Pakistan's actual financing needs to overcome the human capital crisis. "The World Bank Group's support will not be sufficient to achieve the ambitious targets set forth. Attracting private sector investment by improving the business climate is thus the need of the hour," said Raiser in a statement issued by the country office after the end of the visit. He further added that the World Bank Group stood ready to work with the private sector and development partners to mobilise additional resources. The $20 billion for 10 years is just 0.5% of the GDP for every year, and it is not that big and we have to be humble, said Najy Benhassine, the Country Director of the World Bank while speaking at the 'Dialogue on Economy' seminar organised by the Pakistan Business Council (PBC). "The government's own resources, the private sector and different partners of Pakistan should pool resources for long-term planning and results," said Benhassine. He said that Pakistan spends half on education compared to what the countries with similar-sized economies spend on education. The World Bank's country director added that there is no long-term growth and development when one out of three children are out of schools, one girl in four aged 14 or 15 is in secondary school and the learning poverty rate is 75%. "Three out of four children cannot read a basic text," Benhassine said, warning that such outcomes preclude sustainable growth. "It is difficult to grow when you have regular fiscal crises and an energy system with such high losses and high prices, which are impediments to industrial growth and exports," he said. "The CPF would address these issues." The World Bank's VP also underscored that implementation of the Country Partnership Framework will additionally rely on the collaboration between federal and provincial governments, joint efforts to mobilise the necessary revenues and targeted measures to improve the efficiency of government spending. During the visit, Prime Minister Shehbaz Sharif and Raiser officially launched the new Pakistan Country Partnership Framework for FY2026-35. The CPF outlines six strategic focus areas with tangible 10-year targets aimed at achieving long-term development. "The World Bank Group's Country Partnership Framework marks an important evolution in our engagement. It is aligned with Uraan Pakistan, the government's National Economic Transformative Plan and focuses on six outcomes with clear, tangible and ambitious 10-year targets," said Raiser. "We hope these targets serve as an anchor for consistent implementation efforts to ensure tangible results for the people of Pakistan," said the World Bank's VP. Raiser met with the prime minister and several members of his cabinet to discuss the ongoing reform process and prepare the ground for implementation of the CPF over the next decade. Raiser thanked the prime minister for his leadership of the reform agenda, acknowledged Pakistan's progress in economic stabilisation and discussed the policy reforms and specific actions needed to transition to sustained, inclusive growth and development. During his visit, Raiser met with Deputy Prime Minister and Minister for Foreign Affairs Mohammad Ishaq Dar, Minister of Energy and Minister of Water Resources Musadik Masood Malik, and Minister of State for Finance and Revenue Ali Pervaiz Malik. Raiser also met Chief Minister of Punjab, Maryam Nawaz Sharif, and Chief Minister of Khyber-Pakhtunkhwa Ali Amin Gandapur with whom he discussed specific plans to begin implementation of the CPF.
Express Tribune
28-01-2025
- Business
- Express Tribune
Govt to ease tax return process for salaried workers
Listen to article Finance Minister Muhammad Aurangzeb has announced efforts to simplify the tax return process for salaried individuals, highlighting that similar measures have already been implemented in other countries. Speaking at an event titled Dialogue on Economy in Islamabad on Tuesday, he welcomed the recent reduction in the policy rate, calling it a "good omen" for boosting business confidence. The minister also expressed satisfaction over the rise in remittance inflows and IT exports, describing it as a positive indicator for Pakistan's economy. On the budget for the next financial year, Aurangzeb said consultations with various chambers of commerce and industry will take place next month to incorporate their input. He added that government departments have been directed to prepare their expenditure plans for the next fiscal year. Reiterating Pakistan's commitment to international financial obligations, the minister assured that the government is determined to fulfil its commitments with the International Monetary Fund.
