Investment, growth and credit safety: Aurangzeb pledges robust insolvency regime

ISLAMABAD: Finance Minister Muhammad Aurangzeb, on Friday, reiterated the government commitment to fostering a robust insolvency regime to promote investment, growth, and creditor protection.

“The currency is going to be led by market forces. No one is going to talk about where the country should be as that era is gone,” said the minister, while addressing at the stakeholder consultation, insolvency and debt enforcement organized by the Security Exchange Commission of Pakistan (SECP), here on Friday.

The conference drew participation from international delegates, Justices of all High Courts, lawyers, regulators, and policymakers.

The minister highlighted its significance for economic stability and improved debt resolution frameworks. Aurangzeb emphasized the government’s commitment to creating a conducive business environment.

Economy: Aurangzeb outlines steps

He agreed to the idea of forming working group but stressed the need for private sector to work with the Securities and Exchange Commission of Pakistan (SECP) to steer progress, with Ministry of Finance acting as a host. The private sector has to lead the country and the government is there to provide policy framework and policy continuity, he added.

Talking about the framework around insolvency and orderly debt resolution, he said that this is going to be an enabling framework and environment in terms of access to credit, access to finance but also when any one get into trouble how can it ensure rescue through systematic way.

“My recommendation and plea to all banking practitioners that in the first instance our efforts should be on the revival. It is very important to distinguish between willingness to pay and ability to pay,” he added.

He said when there is a “willingness issue”, it is a big issue and when there is an “ability issue”, banking practitioners should ensure to work with management and sponsors to see how you can take them through the cycle without drawing them to the courts or other areas, where your boards and management can decide that there is an ability issue and things are going to be revived in next two to three years and not to push from where they could not revive.

Aurangzeb, terming the directed lending by the government to housing sector wrong approach, stated that it would not be repeated. We are not going to the era of directed lending. We did a wrong thing. That is not the way to go and lend to the priority sector and housing is indeed a priority sector. For what we need to work is to ensure there is a regulatory authority – a long standing demand of the industry and to ensure that foreclosure law actually work.

Talking about the economy, he said that stability has been achieved, the currency is stable, foreign exchange reserves have stabilised. The minister said that the big shift from deficits to surpluses in the primary and current accounts and an increase in foreign reserves to cover two and a half months of imports and would reach a three month cover by end of fiscal year—considered to be a good international benchmark for rating agencies as continue journey towards at least getting into single B category.

The SECP chairman highlighted the critical importance of effective insolvency and debt enforcement frameworks for fostering economic stability and growth. He also requested the minister to form working groups for both insolvency and debt enforcement-related regulations in Pakistan.

Judges from all the high courts of Pakistan participated in the consultation, offering invaluable insights into the legal dimensions of insolvency and debt enforcement.

Their collective expertise played a crucial role in shaping the discussions, fostering a deeper understanding of the challenges and opportunities in enhancing the country’s legal and regulatory frameworks.

Sergio Ariel Muro, Finance Sector Specialist (Insolvency) at the World Bank, shared international best practices and emphasised the importance of insolvency in promoting economic resilience.

The conference also featured expert panel discussions on key issues such as strengthening institutional frameworks for debt enforcement, bridging gaps in insolvency legislation, and enhancing coordination among stakeholders for effective dispute resolution.

The discussions provided a platform for local and international experts to share perspectives on policy reform and innovative solutions tailored to Pakistan’s context. The event continues today (Saturday) with the day focusing mainly on debt enforcement.

Copyright Business Recorder, 2024