Dr. Shamshad Akhtar, the outgoing Caretaker Finance Minister, is advising the incoming government to maintain fiscal prudence and swiftly negotiate a new agreement with the International Monetary Fund (IMF) to implement vital reforms, as inflation stands at approximately 29 percent.
In her departure note included in the Ministry of Finance’s Monthly Economic Update & Outlook for February 2024, Akhtar stressed the importance of sustaining the gains made during the caretaker administration’s six-month tenure. She urged the new government to prioritize completing the last IMF review and promptly reaching an agreement on a new medium-term program to facilitate challenging reforms.
Critical reforms recommended by Akhtar include restructuring the Federal Board of Revenue (FBR), privatizing loss-making state-owned enterprises (SOEs) like PIA, and implementing policies to enhance governance and financial performance within SOEs.
Despite economic instability, measures implemented over the past six months have restored market confidence and boosted economic activity. However, Akhtar highlighted persistent challenges such as unsustainable debt, high interest rates, and weak revenue collection.
She noted a positive growth trend in GDP, reaching 2.1 percent in the first quarter of FY24, with notable growth in the agriculture and manufacturing sectors. Removal of import restrictions has alleviated supply constraints, contributing to economic growth.
Over the past six months, efforts have been made to reduce unproductive expenditures, increase tax revenue, and run a primary surplus exceeding IMF targets. The reduction in subsidy bills for power and gas, along with improved tax collection, has positively impacted the fiscal position.
FBR tax collection saw significant growth, primarily driven by increased domestic taxes due to economic rebound and improved profitability in various sectors. These fiscal improvements have led to a reduction in public debt accumulation and domestic borrowing.
In summary, Dr. Shamshad Akhtar’s departure note underscores the importance of fiscal discipline and proactive engagement with the IMF to address economic challenges and sustain growth momentum.
Story by Khaleeq Kiani
