Pakistan intends to discard its ‘begging bowl’ image from the International Monetary Fund (IMF) by issuing an ESG-compliant $1 billion Eurobond in March.
The Federal Minister for Finance and Revenue, Shaukat Tarin told Bloomberg that “this program should be enough” and the country will not need another IMF program if it starts posting up to six percent in sustainable growth.
Pakistan withdrew roughly 20 bailouts over the last half-century and now aims to emancipate itself from the global lender by reducing its deficits and exploiting its financial markets. Also, after successfully negotiating the final leg of a current $6 billion IMF loan yesterday, Minister Tarin wants to raise $1 billion via an ESG-compliant paper next month. He seeks to reduce the budget deficit to 5 or 5.25 percent of the GDP in the fiscal year that begins on 1 July, down from 6.1 percent the previous year, and increase growth from five percent to six percent.
The first step in Tarin’s strategy to end Pakistan’s low levels of economic activities is to increase exports. Energy rates have already been adjusted in line with the export-oriented sectors of the industry, and the State Bank of Pakistan (SBP) has extended low-interest loans to manufacturers. Tarin has forecast that textile exports, which account for more than half of all exports, are expected to increase by 40 percent to a record $21 billion this year and $26 billion next year.
He also revealed that the government is contemplating similar incentives/policies for the technology sector in order to capitalize on the worldwide surge in venture capital enterprises making big-money moves into the startup space. The federal minister expects such policies to be published within a month.
Ever since he assumed the role as the government’s top finance official last year, Minister Tarin has brokered parts of the IMF’s financial terms, including a lesser increase in electricity costs and moderate tax collection targets than the lender had previously demanded. Resultantly, he had to agree to the global lender’s other more structural demands, such as giving the SBP more autonomy and ending deficit monetization.
Although his predecessors had reverted to reckless spending after the expiration of an IMF program, Tarin has promised to do the opposite by reducing government expenditure in the upcoming budget.