Pakistan’s finance minister rejects consumer-led growth — Dawn
Pakistan’s Finance Minister Muhammad Aurangzeb, speaking at the Lahore University of Management Sciences, said that the government would not choose an economic growth model driven by liquidity and consumption. Instead, the country must focus on sustainable, export-oriented growth and continue tariff reform, Dawn reports.
According to the minister, Pakistan cannot repeat the cycle of import-dependent growth that in the past led to balance-of-payments problems and the need to seek support from creditors. Aurangzeb stressed that the authorities must avoid a situation in which a temporary economic recovery ends in a balance-of-payments crisis.
The government intends to continue tariff reform, he said, primarily to reduce the cost of raw materials and intermediate goods for exporters. He said Pakistani industries had been protected for too long without defined time limits, and there were no plans to retreat from the reform, now in its second year.
Support for exports and employment
The minister said the latest budget was intended to set a course for export-oriented growth. Among the measures, he cited the abolition of super taxes, a reduction in the number of tax categories, and financing for exporters at 4.5%.
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Aurangzeb also emphasized that economic growth must create jobs. He pointed to the experience of a neighboring country where, in his assessment, growth rates of 7–8% did not provide a sufficient number of new jobs. Therefore, the sectors driving the economy must also help reduce unemployment, he added.
Deficits, debt and reserves
According to the minister’s assessment, the combined fiscal and external-sector deficit fell from 12.5% of GDP to 2.6% at the end of the previous fiscal year. He said the fiscal deficit had reached a 22-year low and that the country had recorded a primary surplus for the third consecutive year. The current account deficit, he said, had narrowed to about 0.1% of GDP thanks to remittances and IT services exports.
IT services exports rose from less than $1 billion to $4.6 billion and could reach $5.5 billion in the current fiscal year, Aurangzeb said. Foreign exchange reserves, he said, exceeded the equivalent of three months of imports, whereas during the crisis they covered only two weeks.
The minister also noted that external debt repayments had fallen from $26.5 billion last year to $21.5 billion in the current fiscal year. New external borrowing is mostly being used to replace existing obligations rather than increase the debt burden, he said.
