Pakistan focuses on broadening tax-base, becoming export-led economy: Aurangzeb

Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb on Monday said Pakistan was committed to broadening its tax base and advancing with a focused approach to becoming an export-led economy.

“We are well on our way to achieving the target [tax-base expansion], not only because the IMF is saying that but also because, from my perspective, the country needs to reach that benchmark to make our fiscal situation sustainable,” he said in a television interview with Bloomberg on the sidelines of the Asian Financial Forum in Hong Kong.

The finance minister said the IMF, scheduled to visit Pakistan next month, wanted the country to broaden its tax base and achieve a tax-to-GDP ratio of 13.5 percent, up from 10 percent in December.

After Pakistan secured the IMF bailout last year, it has received some reprieve, including cooling inflation, which provides space for policymakers to cut borrowing costs further and help stabilize a nation still grappling with structural weaknesses.

Stronger remittances, a bright spot, have helped shore up currency reserves. As a result, the rupee rose about 2 percent in 2024, making it one of the best performers in emerging markets. The benchmark stock index also outperformed nearly all other equities markets last year.

Commenting on Pakistan’s economic transformation plan, Aurangzeb said, “We are in the phase of stabilization. Now, where do we go from here? We must focus on sustainable growth. Our current focus is on fundamentally changing the DNA of the economy to make it export-led.”

Aurangzeb predicted that the nation’s GDP would likely expand by 3.5 percent in the fiscal year ending June 30, compared to a 2.5 percent expansion in the prior financial year, with a 3.6 percent economic growth target set for the upcoming year.

In response to a question, Aurangzeb said Pakistan was preparing to debut Yuan-denominated bonds this year to strengthen its finances, while the government remained optimistic about meeting the International Monetary Fund’s (IMF) bailout loan conditions.

He mentioned that Pakistan planned to raise $200 million to $250 million from Chinese investors over the next six to nine months. The plan comes after Pakistan’s sovereign rating was recently upgraded by all three major credit agencies.

The finance minister expected further upgrades and emphasized that the challenge was to enter the “single-B” category, which would allow the country to return to global bond markets to raise funds.

“The country is very keen to tap the Panda bonds and the Chinese capital markets. We have been remiss as a country in not tapping them previously,” he said, adding that China International Capital Corporation was advising Pakistan on the issuance of Panda bonds.