Govt to Sign National Financial Pact to Make Provinces Part of IMF Program: Aurangzeb

Finance Minister Muhammad Aurangzeb on Sunday said the federal government will ink a National Financial Pact with all provincial governments which will make all provinces as part of the new International Monetary Fund (IMF) bailout program. This pact would help enhance tax collection and raise the tax-to-GDP ratio to 14 percent, closer to the 18 percent seen in neighboring countries. The senator addressed a press conference today where he summarized the country’s ongoing economic stabilization efforts following the release of the first IMF tranche of the recently approved $7 billion bailout. Aurangzeb said structural reforms and macroeconomic stabilization were key to making things better. He said the foreign exchange reserves currently cover two months of imports while Pakistan Stock Exchange was hitting record highs. The Finance Minister applauded how the central bank’s key lending rate is declining due to easing inflation. During this time, the federal government rejected several offers at auction for T-Bills and other bonds to show it was getting stronger, he added. Aurangzeb stressed the need for structural reforms, particularly in state-owned enterprises and the energy sector, and mentioned current exercise to right-size the government and elimination of 60 percent of vacant posts. The finance minister acknowledged the challenges in the tax system and declared that non-filers would no longer be allowed to purchase property or vehicles. Tax audits are set to increase and 2,000 experts will be recruited by the Federal Board of Revenue (FBR) to address an estimated Rs. 7 trillion in tax evasion. Steps are also being taken to reduce smuggling losses, which currently stand at Rs. 750 billion. With the inflation rate decreasing and fuel prices falling, Finance Minister urged provinces to activate price control committees to ensure that consumers benefit from these improvements. He added that the government had completely closed all doors to any further tax exemptions and will expand the tax net to ensure fairness for all taxpayers.