Aurangzeb asserts financial stability ahead of IMF bailout

ISLAMABAD: On the eve of an IMF bailout, the government presented an optimistic outlook on macroeconomic indicators on Friday, signalling to the banking sector that Pakistan is no longer a desperate borrower and will set its own terms for future loans.

The resilience of Pakistan’s economy was the central theme of Finance Minister Muhammad Aurangzeb’s economic update to the Economic Coordination Committee (ECC) of the cabinet, which also approved the export of 140,000 tonnes of sugar, including 100,000 tonnes previously disallowed by the federal cabinet due to rising domestic prices.

At the outset of the meeting, the finance minister shared with the ECC members “an update on the current economic situation macroeconomic stability achieved across all sectors of the economy”, the finance ministry said. He said the currency is now in a stable position with foreign exchange reserves at a 26-month high on the back of “very resilient and strong remittances flows”.

ECC approves export of 140,000 tonnes of sugar

Mr Aurangzeb said IT exports had also stabilised at about $300 million monthly figure and a steady growth in the Roshan Digital Accounts with $165m inflows last month. He described the “reduction in inflation to a single digit as a big story”, hoping that inflation would further come down when the September data is released.

He also appreciated the situation with current account as “very encouraging” with $75m surplus achieved in August. He hoped that with softer oil prices, a softer dollar and an aggressive rate cut which has already been reduced by 450bps, the current account situation would continue to be in a good position.

The finance minister briefed his cabinet colleagues on the rejection by the government of all bids for treasury bills on Wednesday, saying the move was “aimed at conveying the message that the government was under no desperation to borrow, and if it were to borrow, it would borrow at its own terms”.

He asked the banking system to focus on lending to the private sector. He said the 450bps cut in policy rate and the resultant ease in borrowing would help the government reduce its single largest expenditure of debt servicing, and create room for the banking sector to step up and lend aggressively to the private sector.

Mr Aurangzeb specifically referred to the IMF board meeting scheduled for Sept 25, saying that “with the prayers of the nation and efforts made by the prime minister in association with bilateral partners, our local teams, administration and all our institutions, we would hear a good news on the 25th and move on from there”.

The minister, however, warned that macroeconomic stability was not an end itself but a means to an end, saying it was the basic hygiene on which building blocks would provide foundation to the whole edifice. “We would move in the right direction on the basis of this approach, and ensure gradual stability in the micro sectors as well,” he added.

The ECC approved a total 140,000 tonnes of sugar export despite the federal cabinet’s snub for 100,000 tonnes export approved by the ECC on Aug 23 on the demand of sugar mills.

The cabinet had rejected the ECC’s decision to export 100,000 tonnes of sugar after Petroleum Minister Musadik Malik raised a lot of hue and cry over the rising rate of the commodity in the local market.

However, the industries and production ministry came back to the ECC, this time for export of 140,000 tonnes of sugar, including 40,000 tonnes to Tajikistan.

An official statement said the ECC approved in principle the summary for export of 40,000 tones to Tajikistan.

Published in Dawn, September 21st, 2024