Government’s economic team unveils progress report on structural reforms, way forward

ISLAMABAD: The government’s economic team on Monday unveiled a detailed progress report on structural reforms and a roadmap aimed at stabilising the economy, accelerating privatisation, cutting power sector losses, expanding the digital footprint, and strengthening the tax system to boost revenues and investor confidence.

“These structural reforms are indispensable to avoid boom-and-bust cycles and move toward sustained and inclusive growth, while warning that without these reforms, the economic agenda could not be taken to the finishing line,” said Finance Minister Muhammad Aurangzeb, while addressing a press conference.

He was accompanied by Power Minister Awais Leghari, Information Technology Minister Shaza Fatima Khawaja, Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial and Adviser to the Prime Minister on Privatisation Muhammad Ali, and Prime Minister’s Coordinator for Right-Sizing, Salman Ahmed.

Reform momentum can lead to ‘immense growth’: Aurangzeb

Aurangzeb said that Pakistan’s economic direction had been set in the right direction through a series of structural reforms, which were now being operationalised to ensure sustainable and inclusive growth. The minister, while acknowledging the widening trade deficit, said that the current account is manageable, backed by record remittances, which are expected to reach USD 42 billion by the end of the current fiscal year.

“I believe there is a broad consensus that we have made significant inroads and achieved considerable progress in terms of macroeconomic stability,” he added.

Aurangzeb said the government had achieved macroeconomic stability, as evidenced by external validation from three leading international rating agencies have upgraded Pakistan’s ratings. “These agencies are now aligned not only on where we stand but also on our positive outlook,” he added.

He said the successful completion of the second International Monetary Fund (IMF) review and the subsequent staff-level agreement in Washington reaffirmed that the country’s economic trajectory was on the right path.

When the exchange rate stabilises, foreign exchange reserves rise, inflation declines, and the policy rate comes down, the benefits are evident for industries, the minister remarked, adding that investors had repatriated more than $4 billion in profits and dividends.

Aurangzeb said investor confidence was crucial for attracting new foreign direct investment (FDI). “Until our existing investors are satisfied, we cannot talk about further FDI,” he said, adding that the government had moved in the right direction toward stability.

Pakistan today stands at a unique confluence of economic stability and favourable geopolitical tailwinds, he said, pointing to stronger trade and investment opportunities with China, the United States, and Gulf Cooperation Council countries.

The minister said the government’s reform agenda covered key areas, including taxation, energy, restructuring of state-owned enterprises, privatisation, rightsizing of the federal government, digital transformation, debt management, and pension reforms. These are the areas consistently highlighted by analysts, think tanks, and our bilateral and multilateral partners, he added.

Replying to a question regarding the proposed 27th amendment and the proposed change in the National Finance Commission (NFC) formula, the minister avoided answering the proposed amendment. However, he said that the NFC meeting is expected in the current month, where such matters would be discussed.

Giving an update on the reforms in the power sector, Federal Minister for Power Awais Leghari said that they inherited very expensive electricity, but despite challenges, reduced prices by Rs 10.5 per unit in the past 18 months. He said the reduction for the industrial units has been to the tune of Rs 16 per unit.

He highlighted relief for industries, including a three-month package offering power at Rs 26 per unit and a reduction in electric vehicle (EV) rates from Rs 71 to Rs 39 per unit. “We are also set to operationalise the Competitive Trading Bilateral Contract Market (CTBCM) in January or February next year to facilitate the electricity trading market,” he said.

Describing the move as the biggest reform in the power sector in 20 years, he said, “This will free the government from the business of purchasing power and the consumers will get better prices of electricity in the future”, said the minister, announcing sweeping reforms in the power sector, including the government’s decision to stop buying electricity directly.

He said the energy sector is being restructured on modern lines, with Rs 48 billion saved through the auction of loss-making plants. “We auctioned 17 units — Rs 48 billion were taken by a government agency and Rs 9 billion by the private sector,” he noted.

Leghari said that an effective plan has been prepared to eliminate the Rs 1.2 trillion circular debt within six years without placing an additional burden on consumers.

“In one year alone, we reduced circular debt by Rs 700 billion by improving governance and cutting losses in distribution companies,” he said, adding that Rs 193 billion in losses were reduced, including Rs 80 billion linked to non-paying tube well owners in Quetta Electric Company’s network. He further said that the government is introducing prepaid metering and automating systems to improve efficiency and save billions of rupees.

Leghari said that 27,000 agriculture tube wells in Balochistan were being solarised to end losses exceeding Rs 40 billion annually.

Talking about the IGCEP 2025-34 plan, the minister said it would save USD 17 billion in CPAEX.

Advisor to the Prime Minister on Privatization, Muhammad Ali, said the government is ensuring full transparency in the privatization process and preventing monopolies.

Speaking about the privatisation of Discos, Ali stressed that the government would proceed cautiously, as the process affects every citizen. “We must ensure that once these companies are privatised, power supply is maintained across all regions, load-shedding is reduced, and electricity is provided at a fair cost,” he said, adding that a restructuring plan has been developed for all three Discos.

The government continues to provide subsidies to a company but aims to avoid similar arrangements with Discos after their privatization, he added.

“Some people argue that the government should sell only 26 percent of shares instead of 100 percent. But as a government, we have to decide whether we want to remain in business,” he said. “The private sector does not want to seek permission from officials for every decision — they prefer to operate freely, he added.

Ali further stated that all non-strategic assets should be privatised, as there is consensus within the government on this policy under the leadership of the Prime Minister.

He also outlined progress on the privatisation of several state-owned enterprises, highlighting the case of the First Women Bank and reiterating that the target is to privatise Pakistan International Airlines (PIA) by the end of the year. According to him, several leading business groups in Pakistan have expressed interest in acquiring the national flag carrier.

He revealed that the First Women Bank was sold for Rs 5 billion — a deal criticized by some — but explained that similar small banks, such as SME Bank, had to be shut down due to financial weaknesses.

He said four groups — Fauji Foundation, Airblue, Lucky Cement, and Arif Habib Group — are participating in the PIA privatization process, while privatization of DISCOs will begin with IESCO, LESCO, and FESCO.

Prime Minister’s Coordinator for Right-Sizing, Salman Ahmed, said that 20 ministries have already undergone restructuring, resulting in the elimination of 54,000 vacant positions with an annual fiscal impact of Rs 56 billion, while multiple ministries and divisions have been merged or closed.

He said that among the completed actions, Narcotics Control merged with Interior, SAFRON merged with Kashmir Affairs, Aviation merged into Defence, CADD, and PWD were shut down.

Cultural institutions, including the PNCA and the National Archives, are under the reforms review. Replying to a question, he said that no institution is exempted and the next phase includes regulators, service academies, and training bodies,” he added. He added that the loss-making Pakistan Agricultural Storage and Services Corporation (PASSCO) will also be shut down to reduce the fiscal burden. Ahmed noted that cabinet approval is required for right-sizing decisions, and the process is being carried out in consultation with relevant ministries.

Highlighting the importance of digitisation, IT Minister Shaza Fatima said digitisation will provide convenience to people, ensure transparency, and save time. “People will no longer have to stand in queues for payment and transfer of the nation,” Fatima said, adding that people will not be able to hide their transactions

She detailed that digitisation was related to increasing the tax net and has an important role in increasing revenues. The minister said that the government will launch the pilot phase of the National Data Exchange Layer (NDEL) in December — a key step toward Pakistan’s digital transformation. “It will make government services faster, simpler, and more convenient for citizens, while also improving the country’s tax and revenue systems.”

Citing a study, the minister said that a 10 percent rise in digital payment adoption could boost GDP growth by one percent. “For Pakistan’s $400 billion economy, that means a potential $40 billion impact,” she added.

“In June 2025, around 500,000 merchants were accepting digital payments. Our target is two million by June 2026, and by September, the number had already reached 570,000,” she said.

She also spoke about the Prime Minister’s upcoming “Asaan Khidmat” initiative, under which 150 federal services will be digitized, with payments made electronically. “The Prime Minister has directed that all government payments managed by the Controller General of Accounts (CGA) be fully digital by June 2026,” she said. Secretary Finance Imdad Ullah Bosal said that last year the government bought back debt to the tune of Rs1.52 trillion. “This year till August, we bought back Rs1.1 trillion, which has led to a saving of Rs120 billion in interest payment,” he said.

Bosal said the government is expected to issue Panda bonds in the coming months, with initial estimates of $250 million, and depending on pricing it can increase to $1 billion over a period of time.

Talking about pension reforms, under the head of the direct contribution scheme for civil employees, he said that the pension fund scheme was notified and operational from July 2024, 8914 new hires enrolled under the scheme, and deduction of contribution has been started. Direct contribution from armed forces applicable from next year, revealed a briefing displayed on this occasion.

Responding to a question later, the Secretary of Finance, however, clarified that they are consulting these issues with the armed forces, as they are also studying different proposals. Their case is slightly different and needs some adjustments. But the work is in progress, said the Secretary.

Replying to a question, he said that the armed forces services structure is different from others with based on tenure. He further said that such practice was made in a neighboring country, but later that was reversed, and, therefore, the government is moving cautiously.

Copyright Business Recorder, 2025