Finance Minister Muhammad Aurangzeb on Monday said he believed the prevailing inflation rate had created space for a further reduction in the key policy rate, but stressed this decision solely rests with the State Bank of Pakistan (SBP).
In the last meeting of the its Monetary Policy Committee, the central bank retained the interest rate at 11%, noting persistent inflationary risks and external uncertainties due to the Iran-Israel conflict. The key policy rate currently stands at 11%, down from a record high of 22% in June 2024.
Addressing a press conference in Karachi, Aurangzeb reiterated that the economy is on a path to stability due to the removal of structural barriers. “The government’s steps have begun yielding results, and economic indicators are improving,” he said, adding the government was engaging with both local and foreign investors to boost economic growth.
“Multinational companies repatriated $2.3 billion in profit in the fiscal year ending June 30, a sign that issues like blocked profit repatriation and letters of credit have been resolved,” he said. Banks must now play a role in reviving ailing industrial units and aid in the privatization process, he added.
“We have asked commercial banks and the SBP about their plans to contribute to economic stability. Their role is vital,” he said. He also highlighted that one of the government’s priorities was reducing the circular debt of utilities.
To a question, the minister clarified the Federal Board of Revenue (FBR)’s new enforcement powers are linked to sales tax, not income tax. He also announced a new simplified tax return filing process for salaried individuals and small businesses. “An easy tax form is now available on the FBR website. It will also be offered to small traders and SMEs,” he said.
Responding to another question on fiscal relief, Aurangzeb claimed the government had granted maximum possible relief to salaried individuals within the available fiscal space. He said every finance minister desired rapid growth but pushing for the same risked depleting foreign exchange reserves.