ISLAMABAD   -  Federal Minister for Finance and Revenue Muhammad Aurangzeb on Tuesday foresaw further decline in inflation rate and policy rate in the coming months. In a televised address, the minister said that inflation had dropped to 6.9 percent in August this year, which is lowest in 44 months. He hinted at further decline in inflation rate and interest rate in the months to come. “The government has strived hard to bring about economic stability,” he said and added that efforts of the ruling coalition have started paying off.

The inflation rate has further dropped to 6.9 percent in September this year, which is the lowest in 44 months. Earlier, the inflation had declined to 9.6 percent in August, which made the State Bank of Pakistan to reduce the key policy rate by 200bps to 17.5 percent from 19.5 percent. He expressed his condolences over the loss of Chinese engineers. “Chinese nationals targeted in Karachi were the officials of independent power producers (IPPs) engaged in talks with the government of Pakistan to revise the agreements.” Deceased engineers were collaborating with Minister for Energy (Power Division) Owais Leghari on IPPs projects, he said and added that talks were ongoing with IPPs to provide further relief to the public.

The finance minister said that strikes and agitation were taking a toll on the economy and bleeding the national exchequer. “Such actions cost the country around Rs190 billion per day, severely affecting economic growth” He urged those calling for strikes to consider their repercussions and instead engage in negotiations to resolve their issues. He urged those calling for strikes to consider their repercussions and instead engage in negotiations to resolve their issues.

Meanwhile, talking to a group of investors led by Barclays, Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb has said the government is focused on ensuring that Pakistan stays on the course of structural reforms in core sectors of the economy, including energy, SOEs, privatization, taxation and rightsizing of government. He said that in the past Pakistan has been seen as a single-tranche country but time has come to remove this perception and implement the structural benchmarks agreed under the programme with the IMF to ensure permanence to macroeconomic stability. The minister briefed the delegation on various policy interventions and initiatives implemented during the last 12 months to reform the economy and also gave them an overview of the growth and macroeconomic stability in key economic indicators, including twin deficits, stable currency, foreign exchange reserves, and inflation that remained “a big story throughout the year”.

The minister said the current macroeconomic stability was an outcome of a successful conclusion of nine-month IMF Stand-by Agreement, initiated by Prime Minister Shehbaz Sharif and implemented with discipline, rigour and vigour by the caretaker administration, paving the way for a larger and longer EFF to bring permanence to the macroeconomic stability and implement structural reforms. He highlighted a positive outcome of the macroeconomic stability for Pakistan was its ability to not only clear the Letters of Credit and Import backlogs by May and June last year, but also clear the payments of profits and dividends close to $ 2 billion to foreign investors.

He said the new fiscal year had started on a clean slate and noted the continuation of macroeconomic stability in the first quarter with current account deficit remaining under control due to strong remittances, healthy RDA flows and exports showing positive trends in terms of diversification and a higher delta in IT exports and services as per August figures.

The minister also referred to credit upgrades by the international credit rating agencies and shared plans to access the international capital markets. He said the government had sent some powerful signals to the local market by scrapping some bank auctions to convey the message that it was under no desperation to borrow and it would only borrow at more palatable rates. He said the government wanted the banks to start lending to the private sector on impersonal terms and also mentioned the incentives offered to banks in the budget this year for increasing their micro lending to the private sector, particularly agriculture, IT ecosystem and the SME sector.

He also briefed the delegation about various steps and measures taken by the government to demonstrate its seriousness to implement the reforms agenda, including the signing of a National Fiscal Pact between the federation and its four units to implement reforms in various sectors. He said the government’s vision was simple and it was to let the private sector lead the growth with policy framework and continuity provided by the government.

To a question, the minister noted that a big drop in the inflation figures from a 38-pc high of last year to a 44-month low of 6.9 per cent in September this year, was a strong marker of economic recovery. The members of the Barclays Investors delegation lauded the minister for his thorough roundup of the Pakistan economy, and expressed their appreciation for the way “things have started looking up in Pakistan”. They also appreciated the structural reforms and stability visible in different sectors of the economy, and evinced keen interest in exploring opportunities for participating in the growth of Pakistan economy through investment and business collaborations.