In his initial official press conference following his takeover of Q Block on Tuesday, Finance Minister Muhammad Aurangzeb made some explicit statements regarding the financial policies he plans to implement, at least in the near to medium run.
The former banker signalled the continuation of the $3 billion Stand-by Arrangement’s IMF-mandated stabilisation policies, stating that Pakistan, a nuclear-armed sovereign state, could no longer afford to continue treating its long-standing economic problems with a “patchwork” solution if it wanted to address the issue of low economic growth and inflation.
Additionally, he made it plain that the Sharif government intended to initiate talks for a new, longer-term, and larger IMF loan during the international lender’s visit for the second and last review of the existing, soon-to-end nine-month facility.
“We would at the very least get things moving and initiate the process. “Let’s observe their reaction,” he stated. It was indicated that additional discussions on the new programme would take place outside of the IMF and World Bank’s spring meetings in Washington in April.
The finance minister’s message was crystal clear: growth will be sacrificed in order to achieve the government’s goal of long-term macroeconomic stabilisation. He said that Pakistan could not expect debt rollovers and cash contributions from friendly nations and that adopting patchwork solutions was not the answer, and that the government needed to meet the structural criteria outlined in IMF plans that Pakistan’s past finance ministers had signed. He emphasised that the best way to combat inflation was to establish macroeconomic stability.
The minister is facing a formidable task, and his prescription for addressing the interconnected problems of low growth, balance-of-payment difficulties, inflation, and fiscal deficit that are plaguing the economy points to a plan for a significant makeover of the government and its budget over the course of the next few years. Additionally, his strategy differs significantly from the PML-N’s well-known financial and economic ideas. Will he have sufficient space to carry out the stabilising measures for as long as they are needed? Is there any assurance that the big real estate mafia or retailers, who make up the ruling party’s primary political constituency, will back his attempts to tax them effectively? Last but not least, if foreign reserves reach a comfortable level, how long can the administration resist the urge to appease its vote bank by promoting growth without carrying out the long-overdue structural reforms? However, managing the aspirations and expectations of the ruling party without straying from the reform route will be crucial to the finance minister’s stabilisation agenda’s success.
He is, in fact, anticipated to receive assistance from the recently established, army-backed SIFC, which was established last year to draw in investment from the Gulf states.