Islamabad:
Moody’s, a global credit rating agency, inquired Tuesday about the implications to miss a key objective of the increase in the tax ratio / GDP to 10.6% in the last financial year, while Pakistan made a categorical land for an ascending revision in the current unwanted rating.
The credit rating agency has also asked questions about the progress of commercial negotiations with the United States and if the central bank still exercised control over imports and the exchange rate market, according to officials of the meeting details.
Moody’s raised these questions during a session with the Minister of Finance of Pakistan, Muhammad Aurangzeb. The Minister of State for Finance Bilal Kayani and the Governor of the State Bank of Pakistan Jameel Ahmad also attended the session, which would determine if the rating agency would modernize Pakistan in his next announcement.
The current note of Pakistan Moody’s is CAA2 with a positive perspective. This note was improved by CAA3 with a stable perspective in August 2024. But it is still below the investment note and obstructs the smooth entry of Pakistan into the international capital markets to increase debt.
According to officials, Moody’s questioned the impact of the disappearance of the tax ratio / GDP during the last financial year on the objectives of the exercise. Aurangzeb said the Federal Board of Return (FBR) would give a separate briefing to the rating agency to respond to one of its concerns, the officials said.
The FBR tax ratio / GDP remained at just over 10.2% against the target of 10.6% after the FBR could only pool RS11.745 taxes of taxes during the 2024-25. The government has missed the annual tax collection objective by a margin of RS1,225 Billions.
After the meeting, the Moody team received a complete overview of the Pakistan reform course, with a particular emphasis on the improvement of the tax ratio / GDP through the reforms of the tax administration focused on technology, the digitization of systems and robust application measures.
The Minister stressed that by virtue of the Prime Minister’s direct surveillance – which presides over regular tax reforms – the government has implemented measures to extend the tax base, connect the leaks and strengthen compliance. Aurangzeb noted that the income of RS2 Billion de Delta made this year had been made by autonomous efforts, and the government has firmly committed to achieving a GDP tax target from 13 to 13.5% in the coming years, according to the ministry.
Moody’s also asked questions about the details of the Pakistani commercial negotiations, but the government did not share any detail, except that the agreement was expected soon. Sources said the United States had requested preferential commercial treatment to which Pakistan proposed to sign a pact.
“The current discussions with the United States on preferential price access have been noted as making encouraging progress,” said the Ministry of Finance after the meeting.
There were also questions about the average interest rate that the government used to allocate the RS8.3 Billions for the debt service for this exercise. Moody’s was informed that an average interest rate of 12% had been used for this exercise.
Moody’s asked questions about the movement rate and any restriction on imports. The central bank said that the exchange rate was determined at the market and that there was no restriction on imports.
The roupine again started to undergo the pressure and the gray market resurfaces with a rate of approximately RS7 per dollar higher than the inter-banque rate, according to merchants on the exchange market.
According to the Ministry of Finance, the finance division provided an in -depth briefing on the macroeconomic prospects of Pakistan, the reform program and financial stability.
“For the future, the Minister of Finance expressed his optimism on the fact that the improvement of macroeconomic indicators and the momentum of the reform would be positively recognized by rating agencies, further strengthening the case of Pakistan to exploit international markets and deepen its stability in the outside sector,” said the ministry.
Aurangzeb and his team presented convincing evidence of macroeconomic recovery, including a sharp reduction in inflation, a drop in policy rate, stabilization of the exchange rate, an excess current account and an increase in exchange reserves – crossing $ 14 billion by the end of June, the ministry said.
He added that improvements in payment entrances and export performance have also been cited as signs of resilience and renewed investors.
During the session, the Minister of Finance informed the Moody team of significant progress that Pakistan made to stabilize its economy and throw the foundations for sustainable and inclusive growth, he added.
He underlined the success of the final examination of the International Monetary Fund (IMF) in the context of the watch arrangement, including the disbursement of the second tranche and progress within the framework of the installation of resilience and sustainability (RSF), as key milestones that have restored confidence in the economic management of Pakistan.
The Minister underlined a series of structural reforms undertaken by the government to anchor long -term stability. These included cautious tax measures in the recently announced budget, the liberalization of tariffs and exchanges focused on export led by export and concerted efforts to rationalize expenses.
The meeting has also described Pakistan’s re-engagement with the global financial markets, including the successful arrangement of $ 1 billion in commercial funding from the Middle East region, provides for an inaugural panda obligation and Pakistan’s intention to explore the Eurobond and other international debt markets as credit ratings improve.
The Minister of Finance also responded to the requests of the Moody team and reiterated Pakistan’s commitment to maintain the course on macroeconomic reforms, including in the fields of privatization, the restructuring of companies (SO) belonging to the State and the delivery of government rights.
