IMF lauds Pakistan's ‘strong' economic reform progress
Addressing economists, researchers and policy experts at Sustainable Development Policy Institute in Islamabad, Binici said the growth across the Middle East and Pakistan is expected to strengthen in 2025 and beyond.
He, however, underlined urgent need for prudent and forward-looking policy actions.
Focusing on Pakistan, the IMF official said the country's performance under the IMF's Extended Fund Facility has been strong so far.
He said early policy measures have helped restore macroeconomic stability and rebuild investor confidence, despite persistent external challenges.
Binici also highlighted Pakistan's progress on climate-related reforms under the IMF's Resilience and Sustainability Facility.
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Express Tribune
4 hours ago
- Express Tribune
Aurangzeb briefs Moody's on Pakistan's reform push, stable outlook
Finance Minister Muhammad Aurangzeb speaks during a meeting with Moody's delegation in Islamabad on Tuesday. Photo: APP Listen to article Pakistan is re-entering global financial markets amid signs of macroeconomic stabilisation, with plans for its first Panda bond and ongoing talks for preferential tariff access with the United States to support an export-led growth strategy, Finance Minister Muhammad Aurangzeb said on Tuesday. In a virtual briefing with Moody's Investors Service, the finance minister outlined the country's macroeconomic turnaround, reform agenda, and external sector stabilisation efforts. Aurangzeb was accompanied by Minister of State for Finance Bilal Azhar Kayani and State Bank Governor Jameel Ahmad. The engagement, held at the Finance Division, was part of Islamabad's broader outreach strategy to regain investor confidence and improve its sovereign credit profile. According to an official statement, Aurangzeb highlighted Pakistan's recent macroeconomic gains, including a sharp drop in inflation, monetary easing through a reduction in the policy rate, exchange rate stabilization, and a current account surplus. He noted that foreign exchange reserves had crossed $14 billion by the end of June, aided by improved remittance flows and stronger export performance. The minister informed Moody's that Pakistan had successfully completed the final review under the IMF's $3 billion Stand-By Arrangement (SBA), which included the release of the final tranche. He also underscored progress under the Resilience and Sustainability Facility (RSF), terming both milestones as critical for restoring market credibility. 'The reform trajectory is firmly in place,' Aurangzeb said, pointing to recent budgetary measures aimed at fiscal consolidation, including expenditure rationalisation and a broadened revenue base. He reiterated that Pakistan is targeting a tax-to-GDP ratio of 13 to 13.5 per cent over the medium term. The Rs2 trillion revenue gain achieved this fiscal year, the minister noted, had come from autonomous administrative efforts, not through new tax measures alone. He stressed that tax reform remains a top priority under the direct oversight of the prime minister, with a focus on technology-driven enforcement, digitisation of tax systems, and plugging leakages. The team also apprised Moody's of ongoing discussions with the US regarding preferential tariff access for Pakistani exports, which Aurangzeb said were 'making encouraging headway.' The meeting served as a platform to showcase Pakistan's re-engagement with global capital markets. The finance minister revealed that $1 billion in commercial financing had already been secured from financial institutions in the Middle East. Additionally, Pakistan is actively working on launching its inaugural Panda bond — a renminbi-denominated bond to be issued in the Chinese market — and is exploring other international debt instruments, including a potential return to the Eurobond market, contingent on rating upgrades. He added that Pakistan remains committed to key structural reforms, including the privatisation and restructuring of state-owned enterprises (SOEs), as well as right-sizing of the federal government. Responding to queries, the minister reiterated that Pakistan is not looking for short-term fixes but is focused on building long-term, inclusive, and export-led growth, while expressing optimism that the reform momentum and macroeconomic stabilization would be reflected positively in future sovereign credit assessments. 'Pakistan is ready to carry forward this journey of resilience, reform, and recovery,' the finance minister concluded, signalling that the country was once again positioning itself as a credible investment destination.
Business Recorder
13 hours ago
- Business Recorder
Govt presents ‘compelling evidence' of Pakistan's economic recovery to Moody's
Finance Minister Muhammad Aurangzeb, in a key engagement on Tuesday, presented Moody's Ratings, a global credit rating agency, with 'compelling evidence' of Pakistan's economic recovery and reform momentum. Accompanied by Minister of State for Finance Bilal Azhar Kayani, the Governor of the State Bank of Pakistan (SBP) Jameel Ahmed, and senior officials from key ministries, Aurangzeb highlighted the country's progress in stabilizing the economy—including a sharp reduction in inflation, a cut in the policy rate, stabilization of the exchange rate, a current account surplus, and a surge in foreign exchange reserves—crossing $14 billion by the end of June. Improvements in remittance inflows and export performance were also cited as signs of resilience and renewed investor confidence, read a statement released by the Finance Division. During the in-depth session, the finance minister apprised the Moody's team of the significant strides Pakistan has made in stabilising its economy and laying the foundations for sustainable and inclusive growth. Moody's upgrades Pakistan's banking outlook to positive He underlined the successful completion of the final IMF review under the Stand-By Arrangement, including the disbursement of the second tranche and progress under the Resilience and Sustainability Facility (RSF), as key milestones that have restored confidence in Pakistan's economic management. Aurangzeb highlighted a series of structural reforms undertaken by the government to anchor long-term stability. These included fiscal measures in the recently announced budget, tariff and trade liberalisation geared towards export-led growth, and concerted efforts to rationalise expenditure. The ongoing discussions with the United States on preferential tariff access were also noted as making encouraging headway. The meeting further outlined Pakistan's re-engagement with global financial markets, including the successful arrangement of $1 billion in commercial financing from the Middle Eastern region, plans for an inaugural Panda bond, and Pakistan's intent to explore the Eurobond and other international debt markets as credit ratings improve. Govt to meet business community tomorrow, ahead of planned strike, says Aurangzeb As per the statement, the Moody's team was provided a comprehensive overview of Pakistan's reform journey, with a particular emphasis on improving the tax-to-GDP ratio through technology-driven tax administration reforms, digitisation of systems, and robust enforcement measures. Aurangzeb emphasised that the government was implementing measures to expand the tax base, plug leakages, and enhance compliance. He noted that the Rs2 trillion revenue delta achieved this year had come through autonomous efforts, and the government was firmly committed to reaching a tax-to-GDP target of 13 to 13.5% in the next few years. The finance minister also addressed queries from the Moody's team and reiterated Pakistan's commitment to staying the course on macroeconomic reforms, including in areas of privatisation, restructuring of state-owned enterprises (SOEs), and right-sizing of government. Aurangzeb expressed optimism that the improving macroeconomic indicators and reform momentum would be positively acknowledged by rating agencies, further strengthening Pakistan's case to tap international markets and deepen its external sector stability.
Business Recorder
20 hours ago
- Business Recorder
Policy mix to forestall boom-bust syndrome
EDITORIAL: The Governor State Bank of Pakistan while speaking at the launch ceremony of Women Entrepreneurs Finance Code stated that unlike in the previous boom-bust cycles the current policy mix is conducive to lasting rise in economic activity rather than a short-sighted, fragile and populist sugar rush. This observation is backed by an optimism displayed in the last four Monetary Policy Statements (MPS). It is significant that the 11 September 2024 International Monetary Fund (IMF) staff report for the 2024 Article IV consultations and request for an Extended Arrangement under the Extended Fund Facility noted that: 'Economic volatility has only increased over time, with a tight correlation between Pakistan's boom-bust economic outcomes and its macroeconomic policies. The repeated attempts to boost economic activity through fiscal and monetary stimulus have not translated into durable growth, as domestic demand increased beyond Pakistan's sustainable capacity, resulting in inflation and depletion of reserves, given a strong political preference for stable exchange rates. Each subsequent bust has further harmed Pakistan's policy making credibility and investment sentiment.' Tellingly, a detailed analysis by the Fund led to the conclusion that these cycles lead to recurrent balance of payment crises, and what the Governor would do well to note is that the discretionary monetary policy (an example being the demand for a low discount rate to jump-start private sector borrowing that in turn would raise industrial output and growth) induces boom-bust inflation cycles and significantly hinders economic growth. The 16 June 2025 statement issued by SBP maintains that 'the MPC anticipates the industry and services sectors to continue to drive economic growth in FY26. This assessment is supported by the sustained momentum in high-frequency indicators — including credit to private sector, imports of machinery and intermediate goods, and business sentiments — and easing financial conditions,' with higher imports a key component of the boom-bust cycle; and the 5 May 2025 statement making the same optimistic observation, 'incoming high-frequency indicators suggest that economic activity is maintaining momentum, as reflected by rising sales of passenger vehicles and petroleum products (excluding furnace oil), increasing electricity generation, and improving business and consumer confidence.' However, these sentiments are not backed yet by corroborating macroeconomic data particularly large-scale manufacturing sector's growth rate that registered negative 1.52 percent July-April 2025 against 0.26 percent in the comparable period of the year before. And while credit to private sector did double from the 323.5 billion rupees July-June 2024 to 676.6 billion rupees in comparable period of 2025 yet the Governor has not yet refuted claims by independent economists that the rise in private sector credit is linked not to the output sector but to the stocks and securities sector. The Governor further noted that the government and the apex bank remain steadfast in transitioning from recently hard-earned economic stability to a medium term economic transformation adding that this resolve is reflected in (i) prudent and cautious monetary policy though there is no consistency in the rationale provided while taking key discount rate decisions leading to the conclusion that the decisions are made by the IMF staff; (ii) fundamentals aligned exchange rate which has remained steady against the dollar even when the dollar plummeted against all major currencies after President Trump announced the imposition of tariffs; (iii) ongoing fiscal consolidation with sustained above 75 percent reliance on indirect taxes for revenue whose incidence on the poor is greater than on the rich; and (iv) improving debt dynamics which have certainly improved due to a reduction in the discount rate from 21 percent in June past year to 11 percent this year though total debt to GDP has risen to around 76 percent. It is concerning that structural reforms continue to focus on raising revenue primarily through raising tax rates rather than amending the inequitable, unfair and anomalous tax structure, reducing debt by lowering the discount rate (which requires IMF approval) and the 1.2 trillion-rupee circular debt retirement indicates lower interest costs due to the lower applicable discount rate rather than any other management or structural reforms. Debt rescheduling as a means to resolving sustained macroeconomic distortions and inefficiencies is unlikely to generate a lasting rise in economic activity and the focus must now shift to on well-defined structural reforms. Copyright Business Recorder, 2025
