Finance Minister vows to improve tax-to-GDP ratio

Islamabad: Finance Minister Muhammad Aurangzeb on Monday reiterated government's commitment to improve the tax-to-GDP ratio as part of ongoing fiscal consolidation measures.

He was speaking at a zoom meeting with the representatives from Fitch Ratings led by Senior Director Thomas Rookmaker, Directors Asia Pacific Sovereign Mr. Krisjanis Krustins and Mr. Jeremy Zook today.

The discussions encompassed ongoing reforms in the energy sector and State-Owned Enterprises, including privatization and rightsizing of federal government entities to streamline operations and improve governance.

The Minister informed the rating agency about multilateral institutions' confidence in financing Pakistan's projects and briefed them about Pakistan's Staff-Level Agreement finalized this month with the IMF for a new medium-term program aimed at bolstering Pakistan's homegrown economic reform agenda. He apprised the Fitch representatives of salient features of the new programme which includes setting a target of increasing our revenues by 1.5 percent of GDP in Fiscal Year 2025 and by three percent over the next three years. A primary surplus of one percent of GDP will also be achieved for Fiscal Year 2025.

Muhammad Aurangzeb also provided an extensive update on Pakistan's current economic landscape starting with the successful completion of Pakistan's 9-month Stand By Arrangement with the International Monetary Fund, emphasizing its positive impact on the country's macroeconomic indicators. He highlighted Pakistan's foreign exchange reserves reaching 9.4 billion dollars, robust stock exchange performance, and CPI inflation at 12.6 percent last month. He noted a 7.7 percent rise in foreign remittances.

Regarding fiscal reforms, the Minister emphasized government's efforts to broaden the tax base, citing a substantial 30 percent increase in tax collection during the current fiscal year compared to the last year. Furthermore, over 150,000 retailers have registered as first time tax payers. The IT exports crossed the figure of three billion dollars.

The representatives from Fitch Ratings appreciated the ambitious targets and fiscal measures adopted by the Government of Pakistan and acknowledged the improvement in economic indicators.