Washington, D.C.— Pakistan’s Finance Minister, Muhammad Aurangzeb, announced on Sunday ambitious economic reforms aimed at transforming the country’s fiscal structure, focusing on tax compliance, privatization, and increased regional trade. Addressing a press conference at the Pakistan Embassy in Washington, he emphasized the need for a “DNA change” in Pakistan’s economy to shift from an import-reliant model to one led by exports. The minister’s statements come amid annual meetings with the International Monetary Fund (IMF) and World Bank, during which he sought support for Pakistan’s economic goals.
Expanding Regional Trade
Addressing regional trade, Minister Aurangzeb expressed a strong stance on the importance of engaging with neighboring countries, including India, despite historical tensions. “Not trading with your neighbors doesn’t make sense,” he said, emphasizing that while geopolitical complexities remain, Pakistan is exploring cooperative ventures through international forums. “We recently attended the Shanghai Cooperation Organization (SCO) and are keen to join BRICS to expand trade,” he added.
This openness aligns with Pakistan’s engagements in regional alliances, such as the South Asian Association for Regional Cooperation (SAARC), which he highlighted as critical channels for economic growth.
World Bank Grant for Capacity-Building
In a major development, the World Bank has agreed to provide Pakistan with a grant for capacity-building initiatives. Unlike loans, this grant will not need to be repaid, representing a significant financial relief for Pakistan. The funds will be allocated toward essential projects, including climate resilience, child health, and education access for out-of-school children. The grant agreement is part of a ten-year World Bank Country Partnership that aligns with Pakistan’s development priorities.
Additionally, Minister Aurangzeb announced the beginning of negotiations with the IMF on securing climate resilience funding, stating, “Anything less than a billion dollars would not be meaningful.”
Strengthening Tax Compliance with New Measures
The Finance Minister underscored his commitment to reform Pakistan’s tax system, particularly through database-driven enforcement and targeted penalties for tax evaders. “We have a database of individuals we believe should be paying taxes and will utilize it for strict enforcement,” he asserted. New regulations will soon prevent tax non-filers from purchasing cars and properties, aiming to increase Pakistan’s tax-to-GDP ratio from 9% to 13%.
These tax measures are central to the government’s objective of ending dependence on IMF programs by enhancing revenue streams and economic self-reliance.
Key Privatization Moves on the Horizon
Pakistan is also accelerating its privatization agenda. Following the impending sale of Islamabad Airport, similar steps are underway for Lahore and Karachi airports. “If [the sale of] Islamabad airport is successful, Lahore and Karachi airports will follow immediately,” the minister said, hinting at a structured timeline with comprehensive due diligence for each asset.
Among other state-owned enterprises (SOEs), Pakistan International Airlines (PIA) and State Life Insurance Corporation are on the list. Aurangzeb explained that privatizing even profitable SOEs could improve efficiency and reduce the financial burden on the government.
Economic Progress Recognized, Foreign Interest in Pakistan Rising
During his meetings in Washington, the minister highlighted Pakistan’s recent economic progress, including a reduction in inflation and a rise in foreign exchange reserves to over $11 billion. International ratings agencies and U.S. business leaders, he said, acknowledged these gains and showed strong interest in investing. To facilitate foreign investments, Pakistan has initiated a one-window approval system for new projects.
