Caretaker Finance Minister Dr. Shamshad Akhtar, in her departure note, has advised the incoming government to stay the course, be prudent, and reach an immediate agreement with the International Monetary Fund (IMF) for a new medium-term program to anchor difficult reforms. With inflation around 29%, she emphasized the need to sustain the gains achieved over the caretaker administration’s six-month tenure by completing the last IMF review and agreeing on a new medium-term facility. The advice includes critical reforms on FBR restructuring, privatization of loss-making SOEs, including PIA, and implementing an SOE policy for improved governance and financial performance.

Dr. Akhtar highlighted that Pakistan faces challenges related to unsustainable debt, unprecedented interest rates, and weak revenue collection. She noted that the country has been in breach of the Fiscal Responsibility & Debt Limitation Act since 2013, impacting its ability to service public debt liabilities. Despite challenges, she mentioned positive economic indicators such as GDP growth accelerating to 2.1% in the first quarter of FY24, reductions in unproductive expenditures, and a boost in tax and non-tax income, resulting in a primary surplus.

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The departing minister stressed the importance of implementing difficult and unpopular measures, such as reducing the subsidy bill on power and gas, to improve the primary account. The revenue side showed growth, with FBR tax collection increasing by 30% in the first seven months, driven by a rebound in economic activity and rising profitability in various sectors. The improvement in the fiscal position also contributed to a reduction in the accumulation of public debt and a decrease in net domestic borrowing.