IMF mission to visit Pakistan next week to take forward $1bn climate fund talks: Aurangzeb

Finance Minister Muhammad Aurangzeb said on Thursday that a team of the International Monetary Fund (IMF) would be in Pakistan for a four-day visit next week to take forward the discussion on a $1 billion fund for climate resilience.

Pakistan has been ranked as the most vulnerable country to climate change in 2022 when it faced devastating monsoon floods that claimed over 1,700 lives, washed away swathes of agricultural land, affected 33 million people, and incurred losses worth $33bn, according to governmental estimates.

The country had requested $1bn from IMF’s Resilience and Sustainability Trust (RSF) in October, the minister had revealed during his visit to Washington then.

“The next IMF mission is [scheduled for] 24th to 28th [February], which will be here to take the climate resiliency fund discussion forward,” Aurangzeb said in an informal talk with reporters in Islamabad.

He said that for now, discussions would be held on the structure for the amount with an agreement as a goal. Reiterating the government’s request, the minister said: “In my view, the amount should be at least a billion dollars.”

The funding under RSF is made available to nations who commit to high-quality reforms to build resilience against climate catastrophes through adaptation.

It is repayable over 30 years, including a 10-year grace, and is normally cheaper than terms for an Extended Fund Facility (EFF), such as the $7bn loan programme with Pakistan which is underway.

In October 2024, IMF recommended Pakistan to invest one per cent of its GDP annually — equivalent to over Rs1.24 trillion based on current estimates — in climate resilience and adaptation reforms to be ready to fight increasing cycles of extreme weather conditions.

The upcoming climate fund mission would be followed by another staff mission, tentatively in the first week of March, for the first biannual performance review of the $7bn EFF.

Confirming that visit, Aurangzeb said: “All is on schedule [right] now.”

A technical mission of the IMF was recently in Pakistan to scrutinise the judicial and regulatory system as part of the ongoing $7bn programme to address governance and corruption vulnerabilities.

During the visit, a delegation led by Joel Turkewitz discussed judicial performance, governance and reforms in a meeting with Chief Justice of Pakistan Yahya Afridi.

Pakistan aiming for ‘B’ rating upgrade: Aurangzeb

Earlier today, Aurangzeb said Pakistan was actively engaged with international rating agencies, with a clear goal in sight to upgrade its credit rating to a “single B” category.

Last year, New York-based rating agency Fitch had upgraded Pakistan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to CCC+ from CCC.

Earlier this month, it acknowledged Pakistan’s progress when it came to making headway regarding economic stability.

Speaking at the “Retail Reimagined: Innovate, Collaborate & Thrive” conference in Islamabad organised by the Pakistan Retail Business Council (PRBC), Aurangzeb noted that the country had already made significant strides in this direction, with a notable rating upgrade last year.

Building on this momentum, he added, Pakistan was hopeful of securing a further upgrade, which would have far-reaching implications for its economic prospects.

“A ‘single B’ rating would not only enhance Pakistan’s credibility in the eyes of international investors but also pave the way for the country to diversify its funding base and regain access to national capital markets,” Aurangzeb said.

“This, in turn, would help Pakistan to establish itself as a bankable brand once again, marking a significant milestone in its economic revival.”

Fitch assigns categories “AAA” to “BBB” (investment grade) and “BB” to “D” (speculative grade), with an additional plus (+) or minus (-) for AA through CCC levels indicating relative differences of probability of default or recovery for issues.

‘Burdening salaried class with tax unsustainable’

During his address, Aurangzeb also reiterated his call for the tax net to be widened, highlighting that the disproportionate burden of taxes on the manufacturing, services industry, and salaried class was unsustainable.

The minister noted the country’s retail sector — which contributes a significant 19 per cent to the country’s GDP — was paying a mere 1pc in taxes, sparking concerns over the sector’s lack of contribution to the national exchequer.

“We need to bring other segments, including agriculture, real estate, retail, and wholesale, into the tax net,” Aurangzeb said. For national interest, “we cannot afford to have people taking a free ride anymore”.

He said the government had been engaging with the retail sector, requesting them to formalise their businesses and pay their due share of taxes.

The minister lauded the provincial government for taking measures towards this end by passing bills in their respective assemblies for imposing agricultural taxes.

He highlighted that the government was focusing on achieving sustainable and inclusive growth instead of being “caught in boom-and-bust cycles” like in past.

“We cannot afford another boom and bust cycle,” Aurangzeb stressed.