Pakistan needs two to three years to implement some of the structural changes the International Monetary Fund has prescribed to break the South Asian country’s chain of financial struggles and bailouts, according to its new finance minister.
The country has long known what is needed in order to steady its economy, and the challenge has been follow-through and implementation, Muhammad Aurangzeb said at the Atlantic Council on Monday. Aurangzeb is visiting the US to attend the IMF and World Bank spring meetings this week, his first trip to Washington since taking office last month.
“Once we get into the execution, we will need a two- to three-year time period so we can actually go through the structural reforms,” said Aurangzeb, who previously worked at JPMorgan Chase & Co. “If we don’t go through the structural reforms, unfortunately we’ll still be looking for another programme,” he said of the South Asian country that has had 24 IMF loans in its history.
One of his most immediate tasks is to seal a new long-term deal with the IMF for a loan worth at least $6 billion, which Bloomberg reported earlier this year. Aurangzeb previously said he expects to conclude the agreement by June for the programme, which will last a minimum three years, and reiterated on Monday that his priority is to get that lending programme and reform plan negotiated as quickly as possible.
Key objectives in the negotiations for the fund will include broadening the tax base, improving debt sustainability and restoring viability to the energy sector, the IMF said last month. These are steps that Pakistan has avoided for decades as they are unpopular decisions.
Pakistan rebuilt trust with the IMF through the completion of its nine-month loan where an agreement was reached in March for the final disbursement, he said. He put a positive spin on the nation’s economy, saying it’s moving in the right direction, supported by bumper crops which have boosted agricultural output, the improving services sector, slower inflation and a stable exchange rate.
“Our country doesn’t need too many policy prescriptions: we have known the what and why not for years, but for decades,” Aurangzeb said.
Pakistan is lurching from one bailout programme to the next with its current $3 billion programme set to end soon. A final loan installment is pending approval that the IMF board is expected to review later this month.
Aurangzeb became finance minister as Pakistan’s economy endures the most turbulent period in its history, with low growth and high debt payments. The nation remains heavily reliant on IMF aid with $24 billion in external financing needs in the fiscal year starting July, about three times its foreign exchange reserves.