Washington (TDI): Pakistan’s Finance Minister, Muhammad Aurangzeb, has expressed optimism regarding discussions with China about extending the maturities of debt linked to the Belt and Road Initiative.
In an interview on the sidelines of the International Monetary Fund (IMF) and World Bank Annual Meetings, Aurangzeb highlighted the urgency of increasing the maturities for loans taken for power plants to create “enough space” to reduce electricity prices.
He noted that electricity costs have surged in recent years, with some households now paying more for electricity than for rent.
“We have just started that discussion, and the response is encouraging,” Aurangzeb remarked, referencing his earlier meetings with Chinese officials during a visit to China in July.
He acknowledged that it was still early in the negotiation process, according to Bloomberg.
Following the recent stabilization from securing a $7 billion loan program from the IMF, Pakistan has managed to get China to roll over $16 billion of its total $26 billion debt due in the current fiscal year that began in July.
Also Read: $7 Billion IMF Package to Ensure Economic Stability: Aurangzeb
To achieve sustainable financial health, Aurangzeb emphasized the importance of increasing the tax-to-GDP ratio from below 10% to 13.5%.
He aims for this to be the last time Pakistan relies on IMF loans, as the country has entered into 25 borrowing programs with the IMF over the years.
Discussions are also set to begin regarding additional financing from the IMF’s climate resiliency fund during the current meetings in Washington.
The government plans to focus on sectors like retail and agriculture, which have historically resisted taxation efforts. Aurangzeb stated that provincial legislation concerning agriculture taxation would be advanced by January, with collection expected to start by July.
Pakistan has been a key partner in China’s Belt and Road Initiative, which has played a crucial role in addressing the country’s long-standing electricity supply issues.
The government is now looking to extend the maturities for debt related to nine power plants constructed by Chinese firms under the economic corridor.
Signs of Economic Stability
In a sign of economic stability, consumer price inflation in Pakistan has decelerated to its lowest level in nearly four years.
Additionally, short-term local government bonds are projected to attract foreign investment inflows for the first time in five years, supported by high yields and a stable rupee.
Over the past 12 months, the benchmark stock index has surged by 70%, positioning it as the world’s best-performing market.
Also Read: Aurangzeb, Dubai Islamic Bank Group CEO Discuss Investment Avenues
Moreover, the State Bank of Pakistan has reduced its benchmark interest rate for three consecutive meetings, bringing it down by 450 basis points to 17.5% from a record high of 22%.
Aurangzeb indicated that further reductions in the policy rate could be on the horizon, with the next meeting scheduled for November 4.
