Pakistan is hoping to finalise both the delayed privatisation of its flag carrier and the outsourcing of Islamabad's international airport in November, the country's finance minister said Wednesday.
Muhammad Aurangzeb, who took office earlier this year, spoke to AFP at the World Bank's headquarters in Washington, where he is attending the annual meetings of the International Monetary Fund and the World Bank.
During a previous interview with AFP in April, Aurangzeb had said he hoped the privatisation of the government-owned Pakistan International Airlines (PIA) could be completed by June 2024.
Speaking Wednesday, the finance minister said the five-month delay was down to two factors: ensuring macroeconomic stability and doing the proper due diligence of the interested parties.
"The reality is, when any foreign investor comes in, or even the local investor, who are going to put in a substantial amount of money, they want to ensure that the foundation is there," he said, referring to macroeconomic factors.
Aurangzeb noted that potential bidders for both PIA and Islamabad airport also required scrutiny, another factor in the delay.
"Therefore it's ultimately the cabinet which approved the extension in the timelines so people can do their due diligence before they make these submissions," he said.
- Brink of default -
Aurangzeb said Pakistan had been behind on existing profit and dividend repayments when the current government took office, and had taken steps to remedy that after making progress on macroeconomic stability.
The country came to the brink of default last year as the economy shriveled amid political chaos following catastrophic 2022 monsoon floods and decades of mismanagement, as well as a global economic downturn.
Inflation peaked at 38 percent, but has since dropped to less than seven percent, after the central bank maintained sky-high interest rates, amid other government tightening measures, including import bans to preserve foreign exchange.
Last month, the IMF approved a $7 billion loan, Pakistan's 24th such payout from the multilateral lender since 1958.
Aurangzeb touted progress on the country's current account deficit and the stabilization of the Pakistani rupee, which has depreciated against the US dollar by about 65 percent since 2020.
"In May and June on the back of this macroeconomic stability and building up on our reserves, we paid more than $2 billion to our existing international investors," he said.
Pakistan's gross public debt currently stands at 69 percent of GDP, according to the IMF, or roughly $258 billion.
- 'Saturation point' -
Alongside privatizing state-owned enterprises (SOEs), Pakistan's IMF deal also rests on increasing its tax base, and reforming of the country's power sector.
Aurangzeb told AFP there was a common theme between all three major issues.
"Tax, power, SOE: There's leakage, there's theft, there's corruption, right?" he said. "And we have to deal with all of that."
But he dismissed media reports that the government was not serious about broadening its tax base, saying that the tax take had risen by 29 percent in the last fiscal year, which overlapped with a prior caretaker government, and was targeted to rise by a further 40 percent in the current fiscal year.
In a nation of more than 240 million people where most jobs are in the informal sector, only 5.2 million filed income tax returns in 2022.
"People who are not paying up, they need to start paying for the simple reason that we have reached a saturation point of the people who are paying," he said.
"The salaried class, the manufacturing industry, reached a saturation point. And this cannot go forward," he added.
The government was also committed to doing a better job of taxing certain sectors of the economy, he said, naming real estate, retail, retail distributors, and agriculture.
- Meetings -
Finance Minister Aurangzeb held meetings with US Assistant Secretary of State for Economic and Business Affairs, Minister of State for Financial Affairs of UAE, teams from FitchRatings and Standard Chartered Bank.
During a meeting with the US Assistant Secretary of State for Economic and Business Affairs in Washington, he acknowledged the importance of the Pak-US economic partnership in Pakistan’s socio-economic development. Aurangzeb has invited US enterprises to invest in the agriculture, IT, and energy sectors of Pakistan.
The Finance Minister met with the Minister of State for Financial Affairs of the UAE Mohamed bin Hadi Al Hussaini and appreciated the UAE’s continued support for Pakistan’s external account.
He met with the team of FitchRatings and briefed them on Pakistan’s economic performance. He told the team that a sustainable financial framework is being developed to improve the economic situation in the country.
Appreciation of the institution for upgrading the credit rating of the Finance Minister from Triple C to Triple C Plus, the Finance Minister gave a briefing on the performance of Pakistan's economy.
He also met with a team from Standard Chartered Bank and appreciated the bank’s longstanding partnership with Pakistan.
During a meeting with a team of Deutsche Bank in Washington, he expressed satisfaction over the recent upgradation of Pakistan's economy by Fitch and Moody’s.
- V20 Ministerial Dialogue -
Earlier, participating in the Vulnerable Twenty Group (V20) Ministerial Dialogue on the theme “Realising Climate Prosperity through Financial Reform, Debt Solutions, and Affordable Capital in Washington, the Federal Minister said that Pakistan is in the process of developing its Climate Prosperity Plan and urged Multilateral Development Banks (MDBs) to expand grant opportunities and concessional financing windows.
The minister was participating in the Vulnerable Twenty Group (V20) Ministerial Dialogue on the theme “Realising Climate Prosperity through Financial Reform, Debt Solutions, and Affordable Capital.
The minister emphasised the need to reform global finance to “make debt work for the climate,” according to press release issued by finance ministry here Wednesday.
He also endorsed the official recognition of the V20 by the International Monetary Fund (IMF) as an official intergovernmental group.
Aurangzeb is leading the Pakistan delegation to the Annual Meetings WB and IMF, being held in Washington DC from 21-26 October 2024. Other delegates include Finance Secretary, Imdad Ullah Bosal; Secretary Economic Affairs, Dr. Kazim Niaz and Governor, State Bank of Pakistan, Jameel Ahmad.
Meanwhile, the minister on the sidelines of annual meetings, met with a delegation from CitiBank led by Jay Collins, Vice Chair of Public Sector.
During the meeting, the Finance Minister briefed the delegation on Pakistan’s economic stabilization and the ongoing reforms in the areas of taxation, energy, SOEs, pensions, and government rightsizing.
He also outlined the long-term “Road-to-Market” strategy, stating that tapping into international capital markets would be on the government’s agenda in due course.
The minister also attended the G-24 Ministers and Governors Meeting and urged all development partners to work closely together to resolve the pressing issues of climate change, population growth and child stunting faced by developing countries especially Pakistan.
In his statement on becoming the Second Vice Chair of G-24 Bureau during the fiscal year 2024-25, Finance Minister emphasized the need to address issues including high debt burdens on developing countries, need for climate action and greater representation of developing countries in the Bretton Woods institutions.
Aurangzeb also had meeting with Makhtar Diop, Managing Director International Finance Corporation (IFC).
Issues relating to expedited evaluation of bids for Islamabad airport, Diversified Payment Rights (DPR), raising local currency through offshore bond issuance, privatization of DISCOs and HBFC came under discussion.
He thanked IFC for its advisory and financial support to Pakistan and requested the Managing Director to deploy innovative financing models and support private investments in agribusiness, healthcare, water, transportation and digital infrastructure in Pakistan.