Finance Minister Muhammad Aurangzeb Stresses on Structural Reforms to Tackle Debt Burden in Davos

Davos:Finance Minister Muhammad Aurangzeb has stated that it is difficult to overcome the burden of debt without fixing the country’s domestic issues first. He made these remarks while speaking as a panelist at a discussion in Davos, Switzerland.

During the session, the Finance Minister highlighted that Pakistan’s biggest issue has been the twin deficits of the current account and fiscal account. He explained that the primary reason for the fiscal deficit is the unsustainable tax-to-GDP ratio of 9 to 10 percent. He further emphasized that the government is working towards increasing the tax-to-GDP ratio to 13 percent through structural reforms.

Aurangzeb pointed out that the government is focused on reducing its expenditures and minimizing the burden of debt repayment. He stressed that relying on debt to fund expenses or provide subsidies is not the solution; instead, the focus should be on enhancing productive capacity and promoting exports.

The Finance Minister also explained that when the GDP growth rate reaches 4 percent, the economy’s dependency on imports worsens the balance of payments, leading to the need for repeated visits to the IMF.

He added that with the 10-year partnership program with the World Bank, Pakistan aims to achieve sustainable economic growth by addressing issues like population growth, poverty, and environmental challenges.

In the second phase of the China-Pakistan Economic Corridor (CPEC), the government will shift its focus from government-to-government collaborations to business-to-business engagements and will encourage Chinese companies to transfer their manufacturing units to Pakistan.

Aurangzeb also expressed that Chinese companies could make Pakistan their export hub, and Pakistan aims to access the Chinese capital market through Panda bonds. He stated that Pakistan seeks to diversify its capital market access and improve its credit ratings by learning from Egypt’s experiences.

Additionally, the Finance Minister emphasized that the private sector must play a leading role in driving economic development. He highlighted the immense opportunities available for Pakistani youth in the IT sector, noting that young Pakistanis are increasingly finding good job prospects worldwide, which is a positive sign for the country.