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Long-term stability takes priority over short-term relief, Says Khurram Schehzad

Karachi: Advisor to Federal Minister, Mr. Khurram Schehzad, delivered an insightful presentation at a workshop titled “Economic & Debt Outlook 2025” as Chief Guest at an event organized by the Financial Markets Association of Pakistan. The presentation included detailed overview of the measures taken by the Finance Ministry, particularly the Debt Management Office, to stabilize and strengthen the country’s finances and the economy.

Underscoring the action plan of the Finance Ministry, Mr. Khurram Schehzad said that “we are making all the efforts to manage fiscal imbalances and optimize finances for long term sustainability”.

He pointed out the adopted approach of enhanced revenue mobilization and expenditure rationalizationn under the structural reforms efforts to optimize public finances. While discussing the key takeaways of the ministry’s strategy, the advisor informed that Pakistan has recently marked its first budget surplus in two and a half decades, primary surplus is almost double of the full year target, and a reduced Debt-GDP. He maintained that tax shortfall is also expected to be bridged by bringing the untaxed and under-taxed under the tax net, including through enhanced compliance and enforcement efforts.

“We are preferring long-term sustainability over short-term and short-lived quick relief measures”, Khurram Schehzad added. He lauded SBP on increasing the foreign exchange reserves by absorbing excess dollars liquidity from the local market. The advisor also mentioned the ongoing projects of Panda Bond and Green Bond whereas SBP will also launch an investment platform for both retailers and corporates to lend directly to the government, which will help the government diversify its debt while keeping the finding cost low.

He highlighted the significance of “rightsizing” to cut budget expenditure. “There are 43 Federal Ministries and more than 400 departments which needs to be reduced and optimized”, Khurram said. Education, Health, IT, Commerce, and many ministries will cut their way down, most of which are already devolved to the provinces so they should be abolished from federal government by which the government will be able to cutdown its running expenses costing PKR 870 bn to the exchequer. Another notable reform under is Pensions, where the bleeding has been stopped, by abolishing many overlaps. The third key area has been SOEs where the commercial entities will either be shut or be put up for privatisation. Energy has been another aread whete the the relevant ministry has already initiated efforts to restructure IPPs contract for reducing fiscal burden, and more so for reducing cost of energy, paving the way for growth and investments.

The advisor added that privatization and deregulation of several entities are under consideration which include PIA, House Building & Finance Corporation, DISCOS, State Life Insurance Corporation, First Women Bank Limited and Zarai Tarrqiati Bank Limited. He contended that National Fiscal Pact has been underway with the provinces for agriculture tax, which will lead to positive outcomes in the months to follow.

He also added that we are determined for export-led growth unlike in the past where we faced boom-bust due to import-led short-lived growth. In this regard, Uraan Pakistan’s 3 key pivots are: Export-led sustainable growth, and Private sector has to lead it, primarily through Optimized public finances.

Khurram Schehzad further added that many wealthy non-filer citizens has long been enjoying an amnesty by having a choice to pay higher tax to stay out of the system. In the near future, there will be no category for non-filers, everybody has to pay their due share of taxes and file their returns. Return filing process will also be made simpler, in this regard. He said “there are around 190,000 people whose tax liabilities are Rs 1.6 trillion” we have to focus these in particular. He also discussed the Tax Laws (Amendment) Bill 2024 to enhance compliance and restrict economic activity for non-filers.

In the last he said the country is facing two existential threats, Climate and Population, which have to be addressed. In this regard, recent Country Partnership Framework with the World Bank Group, which will provide $20 billion in the next 10 years in addressing key social sector issues, alongside IFC’s consent to add $20 billion in private investments, is a significant development where the entire federatiom and the provinces should work togather to improve livelihood and standard of our masses for long-term inclusive and sustainable growth and prosperity.

In addition Advisor’s speech, Mr. Eraj Hashmi, Director Debt, Management Office (DMO) of the MOF, made a presentation on how Pakistan’s debt sustainability is improving, where Debt-GDP ratio has been on the decline. Mr. Hashmi also added how the DMO is making efforts and collaborations for green and sustainability finance, while also adding capacity and quality to the DMO for long term effective and efficient management of public debt.

Consultant Debt, DMO. Mr. Khaleeq Uz Zaman shared technical perspective on how DMO is forming and implementing strategies for long-term availability of both commercial and sharia-compliant debt. He also added how DMO under the MOF is comfortably meeting, and in some cases, exceeding the IMF benchmarks so far, and is also well-positioned to meet future quantitative benchmarks.

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