Caretaker Finance Minister Dr Shamshad Akhtar projected on Saturday that Pakistan’s economic growth would rebound by 2-2.5% in the ongoing fiscal year while tax collection would hit a record at Rs10 trillion.
She said that the central bank’s foreign exchange reserves reached $9.1 billion following the receipt of International Monetary Fund’s (IMF) loan tranche of $700 million last week. In addition, the State Bank of Pakistan (SBP) feels the need for a reduction in its policy rate, but it is subject to the deceleration in inflation.
Speaking online at the IPO Summit 2024, organised by the Pakistan Stock Exchange (PSX), Akhtar apparently differed with the IMF and World Bank over their lower growth forecasts.
The World Bank has anticipated Pakistan’s gross domestic product (GDP) growth at 1.7% while the IMF has put it at 2%.
The finance minister said Pakistan would achieve 2-2.5% economic growth, supported by the agriculture sector growth of 5.6% in the wake of a turnaround in major crops, and the industrial sector expansion by 2.5%.
“Despite challenges, there has been significant progress in macroeconomic, (rupee-dollar) exchange rate and financial stability.”
She was optimistic about revenue collection, saying the Federal Board of Revenue (FBR) would most probably collect Rs10 trillion in FY24 compared to the target of Rs9.4 trillion.
She stressed that the FBR had exhibited strong performance in the first half despite undergoing additional reforms.
According to provisional data, taxes worth Rs4.47 trillion were collected in Jul-Dec 2023 against the target of Rs4.43 trillion, up Rs42 billion.
The minister revealed that Pakistan’s foreign exchange reserves hit a high of $9.1 billion compared to mere $4 billion at the start of her term. The spike in reserves came following receipt of second IMF loan tranche of $700 million last week.
Such high reserves had last been reached in July 2022, indicating they have now spiked to an 18-month high. The IMF wanted Pakistan to achieve that level by June 2024, but the country did it five months ahead.
The finance minister said the SBP was cognisant that its policy rate should be brought down from the high of 22% to prop up economic activities.
“The rate cut, however, largely depends on the deceleration in inflation that has spiked to a record high in the recent past,” she pointed out.
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Akhtar, however, expressed apprehension about the current account balance, saying “as we exit (in the aftermath of elections on February 8), I hope the last quarter does not create complications for the current account.”
The minister appreciated the uptrend at the PSX since the start of the current fiscal year. The bourse gave a return of 55% in 2023 with the benchmark KSE-100 index reaching 62,450 points by the end of December.
But the minister expressed her disappointment with only one initial public offering (IPO) at the PSX in 2023. “The single IPO was really the worst in 15 years of the PSX history.” She asked authorities to help increase the number of inventors at the PSX that remained stagnant at 200,000 for a long time.
“Kindly wake up and move forward to deepen our markets. True potential of the stock market can only be realised when we enhance the retail investor base.”
Renowned speakers at the IPO Summit cautioned that Pakistan could not attract fresh investment under the current environment of a high cost of doing business.
MCB Bank Chairman Mian Muhammad Mansha said that to create an enabling environment, there was a great need to cut the number of ministries to stop financial leakage, bring down energy price, go for privatisation and lay off surplus employees, connect Gwadar and Thar with the main highways, and revive railways.
He was of the view that courts and the bureaucracy reached decisions after investigation and arguments in business cases, but did not announce them for years.
“This pollutes the business environment. Fixing of such issues will automatically encourage investors to set up businesses in Pakistan and hold IPOs,” he said.
Arif Habib Limited Chairman Arif Habib said the current environment for raising new investment and making IPOs was not conducive and was instead challenging.
“There is a strong need to rationalise inflation, interest rate, tax rates and energy prices. It may take five to seven years to fully fix the issues.”
AKD Group Chairman Aqeel Karim Dhedhi said the PSX could not attract IPOs without protecting the rights of minority shareholders. “Regulations for protecting the minority shareholders can enhance market capitalisation to $300 billion from the current $3 billion.”
Published in The Express Tribune, January 21th, 2024.
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