Written by Eric Martin and Fathy Mangi
Pakistan's new finance minister says it will take two to three years to implement some of the structural reforms prescribed by the International Monetary Fund to break the South Asian country's chain of financial struggles and bailouts.
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Muhammad Aurangzeb told the Atlantic Council on Monday that the country has long known what it needs to do to stabilize its economy and the challenge is to implement it thoroughly. Aurangzeb is in the United States this week to attend the spring meetings of the IMF and World Bank, his first visit to Washington since taking office last month.
“Once we start implementing it, it will take two to three years to really move forward with the structural reforms,” said Aurangzeb, who previously worked at JPMorgan Chase. Through structural reforms, unfortunately, we will still be looking for another program,'' he said of the South Asian country, which has received 24 IMF loans in its history.
One of his most immediate challenges is striking a new long-term deal with the IMF for at least $6 billion worth of loans, Bloomberg reported earlier this year. Aurangzeb had previously said he expected to conclude a deal by June on the program, which will last at least three years, and reiterated on Monday that his priority was to negotiate a loan program and reform plan as soon as possible.
The IMF announced last month that key goals for the fund negotiations include widening the tax base, improving debt sustainability and restoring the viability of the energy sector. These are measures that Pakistan has avoided for decades because they are unpopular decisions.
He said Pakistan had rebuilt trust with the IMF through nine months of loan completion and reached a final loan agreement in March. He expressed a positive outlook for the country's economy, saying it was moving in the right direction, supported by a good harvest that boosted agricultural production, an improving service sector, slowing inflation and a stable exchange rate.
“Our country doesn't need too many policy prescriptions. We have known for years and decades what is and why not,” Aurangzeb said.
Pakistan is moving through one relief program after another, with the current $3 billion program set to end soon. The final loan installment is pending approval and is expected to be considered by the IMF's Executive Board later this month.
Mr. Aurangzeb became finance minister as Pakistan's economy endured one of the most turbulent periods in its history, with low growth and high debt payments. The country continues to rely heavily on IMF aid, with external financing needs of $24 billion in the fiscal year starting in July, about three times its foreign exchange reserves.
