Finance Minister Muhammad Aurangzeb on Sunday said the International Monetary Fund (IMF) Executive Board’s approval of a pending staff-level agreement with Islamabad for a fresh bailout was reliant on the $12 billion debt profiling by friendly nations.
Addressing a press conference in Islamabad, he maintained that the external financing gap was “manageable,” and the government was seeking re-profiling of its foreign deposits of $12 billion, including $5 billion from Saudi Arabia, $4 billion from China and $3 billion from the United Arab Emirates (UAE) for a three to five-year period.
On debt related to Chinese Independent Power Producers (IPPs), he said the government was working to re-profile the debt and extend its maturity, adding a Chinese consultant would be employed to advance this objective. “There is a need to understand the very delicate issue carefully as Pakistan does not seek any debt restructuring or haircut but it has requested for an extension in the tenor of maturity of outstanding debt on account of both foreign deposits and Chinese IPPs debt,” he explained.
Aurangzeb, who recently concluded a visit to China to discuss the extension in maturity of loans, claimed Beijing had appreciated Islamabad for taking tough decisions needed to secure an IMF deal. He stressed that Pakistan needed to pursue both China and the U.S. simultaneously and separately in framing its foreign policy and advancing its economic objectives.
Further explaining the situation concerning Chinese IPPs, the minister said there were nine that required careful deliberation. He said joint working groups would be established to create a win-win situation for both sides, adding the process required discussing each IPP’s equity and dividend in detail. On local IPPs, meanwhile, he said the power minister was working on plans that would both honor existing agreements while lowering tariffs so all stakeholders could benefit.
Aurangzeb confirmed reports that Islamabad was discussing a $600 million commercial loan from Chinese banks, adding the government would soon launch the Panda Bond of $1 billion, of which $150-200 million would be capitalized in the first phase.
During his lengthy presser, the finance minister admitted that the economic situation was worsened due to prevailing interest rates, high electricity prices and hefty taxes. However, he stressed, the government had no other choice due to the expansionary budget and derailment of the last IMF program during the tenure of the Imran Khan-led regime that had wiped out foreign exchange reserves and created a trust deficit with the global lender. He maintained that price monitoring committees at the federal, provincial and district levels were working to prevent anyone from exploiting the situation.
According to Aurangzeb, the government had increased taxes on salaried individuals to make up the shortfall from under-taxed and un-taxed sectors. To counter this, he maintained, the government had imposed a fix tax on retailers. He said the FBR had similarly identified 4.9 million potential tax evaders who possessed assets, owned vehicles and traveled abroad, but did not file tax returns.
The minister also reiterated his desire for a reduced size of government, noting that the annual expenditure of ministries stood at Rs. 890 billion, and 20-25% of this could be shaved off and reduce the financial burden.