SAFE PAKISTAN, STRONG PAKISTAN

(Maria Mansab)
Pakistan is navigating a transformative phase in its economic journey, marked by bold reforms and strategic initiatives. The fiscal year 2024-25 budget of Pakistan has been praised as a significant accomplishment, being recognized as the finest model plan of the century. With a sweeping privatization plan for 24 state-owned entities and a groundbreaking Rs 1.1 trillion SME scheme, the country is positioning itself for a new era of efficiency and growth. With the IMF poised to approve a $7 billion Extended Fund Facility, these dynamic changes reflect a nation on the rise, determined to reshape its economic landscape and enhance its global competitiveness.
The Cabinet Committee on Privatization (CCOP) has approved a significant move to privatize 24 state-owned entities (SOEs) as part of the Privatization Program for 2024-29. The 2024-25 budget focuses on privatization, at Rs. 30 billion, reflecting the government’s ongoing efforts to encourage private-sector participation.
This move is part of broader reforms intended to alleviate the financial strain caused by SOEs, according to the Finance Ministry’s report “State-Owned Enterprises Triage: Reforms & Way Forward” state-owned enterprises (SOEs) are responsible for about 90% of the total losses annually.
During the PTI government, SOEs caused significant losses to the national exchequer. According to Prime Plus a Pakistani-based think tank April 2024 report, the government provided Rs 1.93 trillion in support to SOEs during FY2019-22. Sectors like electricity and infrastructure incurred substantial losses, with the electrical sector losing Rs 321 billion and the infrastructure, transport, and communication sectors losing Rs 295 billion. Major loss-makers included NHA, Pakistan Railways, PIA, and electricity sector DISCOs.
The current government has taken a substantial step by launching a Rs 1.1 trillion scheme for small and medium enterprises (SMEs) to spur growth and create jobs on a large scale. In stark contrast, the PTI government’s approach to supporting SMEs was notably inadequate. The SME Policy 2021 was introduced with much fanfare, but it only allocated a meager Rs 30 billion for the development of the sector.
The Federal Board of Revenue (FBR) has made significant changes to ease conditions for sales taxpayers by relaxing the requirement to file corresponding sales tax returns to claim input tax for many sectors.
While during PTI’s tenure, there were no significant initiatives targeting the relaxation of sales tax return requirements to this extent. It introduced various tax reforms, but these did not specifically address the complex issues as the team Pakistan has done with these recent amendments.
The present government emphasizes investment over aid from friendly countries, and significantly, the IMF’s Executive Board is expected to approve a $7 billion Extended Fund Facility (EFF) for Pakistan by the end of this month. Under the prime minister’s leadership, Team Pakistan is committed to advancing the macroeconomic stability agenda, as stabilization is crucial for growth.
Notably, Pakistan’s exports rose 11.83% to $2.31 billion in the first month of the new fiscal year 2024-25. However, according to the Pakistan Bureau of Statistics (PBS), exports in July FY2021-22 were recorded at $2.2 billion. In July 2022, Pakistan’s exports posted a decline of over $700 million, or 24% month-on-month (MoM).
In FY2023-24, Pakistan’s exports increased to $30.64 billion; in FY2021-22,
Pakistan’s exports were valued at $26.8 billion. Pakistan’s exports are expected to register over 105 growth and reach around $31 billion in the current fiscal year.
In July FY2024-25, Pakistan experienced a notable decline in imports, with the total value falling by 14.27% to $4.25 billion. This marks a significant decrease from the $4.8 billion registered in July FY2021-22.
In FY2023-24, Pakistan’s imports fell to $54.73 billion, reflecting a notable decline from the $58.9 billion recorded in FY2021-22. This decline in imports has led to a more manageable trade balance and highlights the country’s effective import regulation and economic adjustments.
In July of the current fiscal year, Pakistan’s trade deficit was recorded at $1.95 billion. This represents an improvement compared to the $2.64 billion trade deficit reported in July FY2021-22, according to official data from the Pakistan Bureau of Statistics (PBS).
In FY2023-24, the trade deficit narrowed to $24.08bn. However, in FY2021-22, the trade deficit stood at $32.9 billion. This significant reduction indicates more balanced trade dynamics and reflects improved economic management.
Currently, Pakistan’s overall liquid foreign reserves stand at $14.39 billion. State Bank of Pakistan (SBP) saw its foreign exchange reserves increase by $75 million, reaching a total of $9.102 billion, with net foreign reserves held by commercial banks at $5.29 billion. This contrasts with FY2021-22, when Pakistan’s foreign exchange reserves were $10.9 billion. The recent growth in reserves reflects improved foreign exchange management and stronger economic fundamentals.
As Pakistan embarks on this pivotal economic journey, the recent reforms and strategic measures signal a promising shift toward stability and growth. With anticipated IMF support and ongoing reforms, Pakistan is poised to strengthen its economic foundations and advance from stabilization to sustainable growth, reflecting a new chapter of resilience and opportunity in its economic narrative. With these initiatives and improving economic indicators, it is evident that Pakistan will soon move from the stability zone to the growth zone, marking a significant success.