MINISTER for Finance Senator Muhammad Aurangzeb has reiterated that the government’s medium-term economic vision rests on moving from stabilization to durable, broad-based and inclusive growth led by exports, remittances, productivity and private investment.
Addressing a news conference on Sunday, he referred to clear signs of momentum in domestic economic activity and said that the challenge ahead was to sustain this trajectory while ensuring that Pakistan does not return to the boom-and-bust cycles driven by external sector pressures. Describing structural reforms as central to the government’s agenda, the Minister noted that work on pension, debt, SOE reform, the digital economy, taxation, energy and rightsizing was proceeding as committed earlier.
Plans to reform the economy were announced by almost all governments in the past but no worthwhile progress was achieved because of lack of commitment and continuity. High sounding initiatives were launched but left midway in the face of resistance by vested interests and due to political expediency. In this backdrop, it is encouraging that the government of Prime Minister Shehbaz Sharif is pursuing the agenda of reforms, aimed at sustainable growth with strong determination undeterred by various odds. This resolve was also reflected, once again, by what Finance Minister Aurangzeb said during his broad-ranging press conference enumerating not only successes but also plans to carry forward the process of reforms and development. The performance of various sectors during the last quarter bears testimony to the prudent approach of the government as cement production rose by 16 percent, fertilizer by nine percent, petroleum by four percent, automobiles by 31 percent and mobile phone manufacturing by 26 percent. Above all, large-scale manufacturing grew by 4.1 percent year-on-year in the first quarter, reflecting a positive shift compared to the contraction recorded last year. The export performance has strengthened, with overall exports rising 5 percent and IT services exports growing by over 20 percent year-on-year, prompting the Minister to point out that the IT sector is establishing itself as a critical pillar of the “new economy,” alongside emerging sectors such as minerals and mining. Future prospects for the mineral exports are bright as financial close of Reko-Diq has been achieved, representing a transformational investment that will generate an estimated 2.9 billion dollars in annual exports once production begins. Agreements already concluded with the United States and those in the pipeline also augur well for a significant increase in exports. There are also many other positive signs including the strong interest of international firms in sectors like energy, mining, IT, telecom, construction, logistics and EV manufacturing. There have also been commitments from global companies such as Aramco, Wafi, Gunvor, Turkish Petroleum, Barrick Gold, Citizen Metals, Nova Minerals, BYD, Chery, NWTN Motors, Abu Dhabi Ports and Google whose senior leadership recently announced the opening of a Pakistan office to serve as a future technical and export hub. It is also a matter of satisfaction that the country received remittances worth 38 billion dollars last year and this figure is expected to cross 41 billion dollars this year, providing a sizable buffer to the current account. Similarly, Pakistan’s domestic debt stock has stabilized for the first time in nine years and debt servicing costs have begun to decline with the reduction in the policy rate. The Finance Minister was justified in claiming that Pakistan had turned a corner from the crisis of two years ago and was now pursuing a stable, export-driven, investment-focused growth model grounded in structural and institutional reforms. There are, of course, issues like widening trade deficit, marginal increase in exports despite announcement of incentives by the Government, rising cost of doing business, unfair taxation, inability of the authorities to document the informal sectors, phenomenal increase in external debt and faulty assumptions about exchange rate, which need to be addressed to ensure steady march on the path of growth.
