Finance Minister Muhammad Aurangzeb on Tuesday reiterated his confidence in securing approval of the International Monetary Fund (IMF)’s Board of Directors for a staff-level agreement by the end of August.
Addressing the “Climate Action for Pakistan” event in Islamabad, he said that once the deal was finalized, the government would initiate discussions with the IMF management board for climate financing. Maintaining Pakistan’s economy was on the “path to stability,” he said ongoing reforms would enable sustainable economic growth and development.
As part of its economic revival, Aurangzeb stressed, Pakistan must expand its tax net, improve transparency, implement energy sector reforms and enhance governance. “The current government is taking necessary measures in these areas,” he said, adding, the country must increase its resources to accommodate its growing population.
Emphasizing the need to initiate projects that address challenges arising from climate change, he urged the private sector to join the government in financing such initiatives. Noting Pakistan was among the countries most affected by climate change, he recalled the 2022 floods had caused devastating losses amounting to $30 billion. He regretted that despites promises of $9 billion in assistance at a conference in Geneva, the country had not received the funds.
Separately, speaking to media after a meeting of the Standing Committee on Finance, he announced that China, Saudi Arabia and the U.A.E. had agreed to roll over $12 billion debt for one year. This was a prior condition of the IMF for a $7 billion Extended Fund Facility.
According to Aurangzeb, the IMF had identified a $3-5 billion financing gap over the three-year program period, which was quite manageable. “Pakistan has also received an offer from a foreign commercial bank but we are waiting for the IMF Board approval to ask the lender to cut the offered interest rates,” he said.
He also referred to the Fitch ratings agency’s decision to improve Pakistan’s credit rating and the State Bank of Pakistan’s decision to cut the interest rates by 1% as “very critical elements for achieving macroeconomic stability.”
To a question on energy debt owed to China, Aurangzeb said the government was considering employing another Chinese financial adviser to secure the desired rollover. He said Pakistan had requested up to a five-year extension in energy debt, but noted a final agreement would take some time. Even converting Chinese power plants from imported to local coal would take 2-3 years, he added.