Finance Minister Muhammad Aurangzeb announced that the federal government is set to sign a National Financial Pact with all provincial governments, integrating them into the recently approved International Monetary Fund (IMF) bailout program. This move aims to increase collaboration between federal and provincial levels, ultimately boosting tax collection efforts and raising the tax-to-GDP ratio to 14 percent. The target seeks to bring Pakistan closer to the regional average of 18 percent, which is currently observed in neighboring countries.
The announcement came during a press conference where the Finance Minister outlined the government’s economic stabilization strategies following the release of the initial tranche of the $7 billion IMF bailout package. The program’s approval signals an effort to stabilize Pakistan’s economy and address structural challenges.
Minister Aurangzeb emphasized the significance of structural reforms and macroeconomic stabilization in improving the country’s economic outlook. He highlighted that Pakistan’s foreign exchange reserves have reached a level sufficient to cover two months of imports, a sign of increasing stability. Additionally, the Pakistan Stock Exchange (PSX) is experiencing record highs, reflecting positive investor sentiment.
The Finance Minister noted that easing inflation has allowed the central bank to lower its key lending rate, contributing to improved economic conditions. He also pointed out that the federal government has turned down several offers during the recent auction for T-Bills and other bonds, signaling its growing financial strength.
Aurangzeb underscored the need for further structural reforms, particularly targeting state-owned enterprises (SOEs) and the energy sector. He mentioned ongoing efforts to streamline the government structure, including the elimination of 60 percent of vacant positions. This restructuring is part of a broader strategy to enhance efficiency and reduce expenditures.
Tax system improvements were also a focus of Aurangzeb’s address. He emphasized that non-filers would no longer be permitted to purchase property or vehicles, as the government aims to ensure compliance with tax regulations. The Finance Minister announced plans to increase tax audits, supported by the recruitment of 2,000 experts by the Federal Board of Revenue (FBR). This measure targets reducing tax evasion, which is currently estimated to account for around Rs. 7 trillion.
In addition to boosting tax compliance, the government is also taking action against smuggling, which has been causing losses of approximately Rs. 750 billion annually. Efforts to reduce these losses are part of a broader initiative to curb illegal trade and improve the efficiency of border controls.
With a declining inflation rate and a decrease in fuel prices, Aurangzeb called on provincial governments to activate their price control committees. This step aims to ensure that the recent improvements in economic conditions are reflected in consumer prices, allowing the public to benefit from the lower cost of living.
Moreover, the Finance Minister stressed that the government has closed all avenues for further tax exemptions. The focus now is on expanding the tax net, ensuring a more equitable distribution of the tax burden and increasing overall compliance. This approach is intended to create a fairer tax system where all eligible taxpayers contribute their due share.
The National Financial Pact is expected to facilitate a more unified and strategic approach to fiscal management across federal and provincial levels. By aligning the provinces with the IMF program’s objectives, the government aims to create a more stable and resilient economic environment in Pakistan. This collaboration between the federal and provincial governments is seen as a crucial step toward achieving long-term economic stability and growth, ensuring that Pakistan can meet its financial commitments and foster sustainable development.