Page 8 - CMA Journal (Mar-Apr 2023)

E x c lus iv e I nt er v iew

ine ciency of this sector and improve the quality of
policy to lower in ation while also ensuring a exible public service provision to the private sector.
exchange rate to bu er shocks and rebuild reserves.
Looking ahead, the authorities Looking ahead, the authorities have also expressed  Establishing a competitive and level playing eld
with strong public sector governance, free of
have also expressed interest in a interest in a successor medium-term Fund-supported preferential treatment, to further encourage private
program, permanently resolving Pakistan’s scal and
savings and private investment.
successor medium-term external sustainability weaknesses and laying the  Allowing a fully- exible exchange rate that promotes
foundation for strong, sustainable, and inclusive growth.
Fund-supported program, The IMF could support a program which cements export-oriented activities, and broadening reforms to
credibility through sound policy making and robustly
permanently resolving Pakistan’s tackles long-standing structural challenges. reduce energy sector costs while also allowing a
reduction in tari s for businesses.
scal and external sustainability ICMA: Do you think FBR restructuring is vital for ICMA: What new measures the Pakistani policymakers
boosting the tax revenues?
must take to enhance the competitiveness of the
weaknesses and laying the Esther Perez Ruiz: Pakistan needs to signi cantly economy?
foundation for strong, mobilize revenues to create resources for much needed Esther Perez Ruiz: Exports as a share of GDP have fallen
spending,
strengthen
social
development
and
markedly over the past two decades. Boosting export
sustainable, and inclusive growth sustainability, and reduce overreliance on external competitiveness is essential to reducing external
nancing. Overall, it is essential for Pakistan to increase vulnerabilities, reversing Pakistan’s productivity decline,
the progressivity, simplicity, and fairness of the tax and increasing its growth potential. In addition to the
system so that those who can a ord it contribute their policies already discussed, the agenda requires reducing
In addition to supporting sound policy making, the IMF fair share. This requires e orts on both tax policy (e.g., Consistent sound policy making and strong ownership of any anti-export bias by implementing the national tari
long-delayed reforms can enable Pakistan to protect
supports Pakistan by building technical capacity in increasing taxation of agriculture and property) and macroeconomic stability and bolster growth, access the policy and gradually reducing import duties in Pakistan
public institutions. During the caretaker period, we revenue administration. Strengthening the FBR and its nancing from external partners, and eventually return which, averaging 20 percent, remain amongst the
have been working closely with the authorities and governance is critical to achieving these goals. We highest in the world and directly harm exporters by
collaborating with other international organizations welcome the focus on digitalization to e ectively expand to the market. The Pakistani authorities can develop such incentivizing import substitution.
and development partners on key capacity the tax base. Similarly, building a culture for enhanced a program, with key e orts that include (i) strengthening
development initiatives to durably raise revenue and transparency, accountability and separation of the tax public nances and broadening the tax base (including The modernization of export promotion schemes is also
improve the quality of spending to tackle social and collections and policy functions, as intended by the to undertaxed sectors) to make the tax system simpler, necessary to reduce reliance on unconditional subsidies
climate-related challenges. restructuring plan under consideration, are steps in the fairer and more e cient; (ii) restoring the energy sector’s (e.g., Export Finance Scheme and the Drawback of Local
right direction. viability by accelerating cost reducing reforms which Taxes and Levies). These schemes have proved costly for
ICMA: How do you see the current economic ICMA: Pakistan’s Debt service requirements is should allow CD-neutral tari s to decline; (iii) monetary taxpayers and with limited impact on exports. In this
situation in Pakistan, especially the key challenges estimated at US$25 billion in 2023–24. Do you think policy aimed at returning in ation to target, with a vein, we welcome the authorities’ recent actions to phase
facing the economy? debt rescheduling is the only option left for the exible FX market supporting external rebalancing and out SBP’s involvement in the re nancing schemes and
Esther Perez Ruiz: Pakistan’s economic and nancial Government? the rebuilding of foreign reserves; and (iv) establishing an task the Ex-Im Bank with allocating subsidized lending
schemes against budget resources in a fairer and more
environment conducive to private-led activity through
ICMA: Please brie y share the contribution of the mobilized properly, they can contribute to higher living position has strengthened over the course of this scal Esther Perez Ruiz: It all depends on the authorities’ the removal of distortionary protection, advancement of transparent manner.
IMF in supporting Pakistan on economic policies standards (per capita income). year, with gradual disin ation underway and external taking policy and reform actions commensurate with
and reforms? pressures easing on the back of prudent policy addressing Pakistan’s economic imbalances. SOE reforms to improve the sector’s performance, and ICMA: Any special message to our readers, especially
The recent period of Pakistan’s 2023 Stand-by management and the resumption of in ows from the scaling-up of investment in human capital. professional accountants?
Esther Perez Ruiz: Let me start by thanking ICMA Arrangement (SBA) shows some of the bene ts of sound multilateral and bilateral partners. However, sustained ICMA: How Pakistan can become a self-reliant country
International for the opportunity to o er, on behalf of the policy making supported by a Fund-supported program. reform e orts are needed to address Pakistan’s so that it can reduce its dependence on foreign loans? Esther Perez Ruiz: With a large domestic market, young
IMF, our perspective on Pakistan’s present economic After a period of economic turbulence in FY2023 deep-seated economic vulnerabilities amidst the ongoing labor force, an entrepreneurial orientation, a privileged
situation and potential opportunities. stemming from a di cult external environment and challenges posed by elevated external and domestic Consistent implementation of Esther Perez Ruiz: The policy and reform areas already location, and extensive donor support and market
policy slippages, the caretaker government and State discussed are central to reducing reliance on foreign access, Pakistan has the potential to become a dynamic,
The IMF is here to help support Pakistan’s e orts to Bank of Pakistan have brought about a renewed sense of nancing needs and an unsettled external environment. sound policies should ultimately loans, but also making the foreign loans more productive emerging market economy. To unleash this potential,
realize its potential through sound economic policies and economic stability. Over the past few months, Pakistan’s To cement the stability established over the past 9 and a ordable. Consistent implementation of sound there is a need for sustained and consistent
reforms. These are needed to reduce Pakistan’s structural economic and nancial position has improved with months, consistent sound policy making needs to lead to higher public and private policies should ultimately lead to higher public and implementation of good policies oriented to maintaining
vulnerabilities that make it susceptible to high economic growth and con dence gradually recovering on the back continue. In this vein, the authorities are determined to private sector savings but also attract foreign nancing macroeconomic stability and putting in place the
volatility and low growth. Our partnership with the of prudent scal management with due protection of the deliver the FY24 general government primary balance sector savings but also attract for productive investments at lower cost that can foster conditions for private-led growth. In this respect,
government seeks to create an environment to social safety net, a monetary stance geared toward target of 0.4 percent of GDP, continue e orts towards private-led growth and the build-up of reserves. Key stronger focus on good governance, transparency, and
strengthen private sector activity and create investment lowering in ation and pursuing exchange rate exibility broadening the tax base, and implement timely power foreign nancing for productive policy goals in this regard include: the institutional environment that respects the rule of
and job opportunities, as well as to mobilize resources for and transparent FX market operations, and the timely and gas tari adjustments so that there is no investments at lower cost that can law are critical for economic stability and growth.
critical social and development spending to make adjustment of power and gas tari s to shore up energy accumulation of circular debt (CD) in FY24, while the  Reducing the crowding out of private investment by Professional accountants have a particular important role
concrete progress toward the Sustainability and sector viability while protecting the vulnerable through vulnerable are protected through the progressive tari foster private-led growth and the the government by creating scal surpluses, to play in this respect.
Development Goals. For example, Pakistan’s young labor progressive tari structures. Continuing these policies structure applied to energy. The State Bank of Pakistan supported by broader and fairer tax revenue. The Editorial Board thanks Ms. Esther Perez Ruiz, IMF Resident
force is an unrealized strength given high with deeper structural reforms will help Pakistan move remains committed to maintaining a prudent monetary build-up of reserves Improving the quality of public investment and SOE Representative in Pakistan for sparing from her precious time to give
unemployment, informality and economic volatility. If from stabilization to stronger more inclusive growth. reforms will reduce the scal cost of the existing exclusive interview for Chartered Management Accountant Journal.

6 ICMA’s Chartered Management Accountant, Mar-Apr 2024