The Minister of Finance, Muhammad Aurengzeb, said Wednesday that there was room to reduce the monetary policy rate for the end of this year.
After reducing the 1,000bps interest rate of 22 percent since June 2024 in seven intervals, the State Bank of Pakistan (SBP) has maintained it at 11 % since May. However, the business community has expressed its intense disappointment for the decision.
When addressing an event in Islamabad today, Aurengzeb said: “The monetary policy rate and the market -based exchange rate are largely the scope of the State Bank of Pakistan and the monetary policy committee.
“Having said that, in my personal opinion, I think there is room to make more in terms of policy rate, and I have a lot of hope that during the course of this calendar year, we will see the movement on the policy rate that goes to the south,” added the minister.
He pointed out that “if it was an average inflation or inflation of the nucleus,” there was room for the SBP to reduce the rate.
“National security and economic stability are correlated,” said Aurengzeb.
“In the last 1.5 years, we have progressed strong on the economic front,” he said, listing: “Increase in the country’s economy and per capita income, stability in the economic sector, the decrease in the records of financial deficit and inflation, improvement in the current surplus of the external account, the increase in records in currency reserves and bolts.”
Summarized the current economic state of the country: “In financing costs, we have moved in the right direction. On the energy side, we are beginning to move in the right direction.
“On the fiscal side, the fiscal space we had and what we could do in this budget, I am very clear in terms of the direction of the trip. We need to bring taxes to a regional competitive level,” he added, emphasizing that expanding fiscal networks and closing the gaps were necessary for that.
Noting that international financial institutions have praised the economic reforms of Pakistan, and that Fitch and S&P Global Ratings had improved the country’s credit qualifications this year, Aurengzeb said he had the hope of “the third agency”, an apparent reference to Moody’s, doing the same soon.
Aurengzeb has already urged Moody’s in July to improve the current Caa2 credit qualification of Pakistan during a virtual participation in July.
Speaking about the recent commercial agreement insured with the United States, in which rates were reduced from 29 percent to 19 percent, the financial tsar acclaimed the “regionally competitive rate.”
Yesterday recalled the meeting of the Minister of Commerce Jam Kamal with leading exporters of several segments and described it as a “fantastic opportunity.”
“What it used to say as part of the private sector, it is necessary to implement that when we are public servants now,” said Aurengzeb.
By pointing out that he previously gave the example of how “Mumbai is not going to Delhi, but Delhi is going to Mumbai” at the time of Indian’s budget, the minister emphasized that the government needs to visit the business community itself for consultations.
Economic sectors
During the media information session, Aurengzeb also highlighted a “two -digit increase” in exports in textile, IT and pharmaceutical sectors.
Observing an improved “local business environment”, he added: “SME loans (small and medium enterprises have increased by 41PC. Should it be even greater? The answer is yes. But 41pc is not a small or insignificant number.
“Loans in the agricultural sector have crossed the figure of RS2.5 billion. Private sector loans have increased by 38 percent,” he added.
The financial tsar explained that once the fiscal discipline is achieved, the government’s indebtedness requirement will decrease, and the bank and other economic institutions will be communicated with the private sector. The Government has significantly increased its indebtedness of commercial banks, reaching RS2.7TR in early May.
He added that the government had reduced its RS1TR debt service in the last year. “The service of God, our debt service will also decrease by more than 1TR this year.”
Remembering their recent meetings with the Governor of SBP, Aurengzeb emphasized: “We are putting our home in order, which is the federal government. And, therefore, it is important that it also take the efforts it is making towards the private sector.”
The Minister of Finance also pointed out the wave of records of the Pakistan Stock Exchange, which crossed 147,000 points yesterday. He observed a 60pc growth in it, without specifying the timeline.
Aurengzeb stressed that there had been a “record increase” of 65,000 new investors who have entered the PSX during the last year. The annual levels of company records had also exceeded 250,000, said the minister, which qualifies both developments as a “great structural change.”
‘Dernessization of 43 current ministries’
Speaking about structural reforms, the minister pointed out the ongoing tariff reforms, which they were taking place for the first time in the history of Pakistan.
He stressed that the reforms aim to explore how to reduce the costs of raw materials and intermediate products so that Pakistan can become an economy directed by export.
In the Government Rights Plan, the Financial Tsar said that the process for 43 ministries and more than 400 departments was underway. He also reaffirmed that the privatization of state institutions will accelerate this year.
The Government had exceeded its original deadline of June 30 to complete righttsizing and has written to several ministries to seek its details.
Aurengzeb also promised an additional reduction in energy costs due to savings of the agreements reviewed with 27 independent energy producers earlier this year.
