Pakistani Finance Minister Muhammad Aurangzeb on Wednesday acknowledged that the govt is aware that a number of companies have either shut down, or otherwise halted operations in the country because of high taxation and expensive energy, and insisted that the government is pushing ahead with much needed structural reforms in order to mitigate the mounting tensions plaguing various businesses in the country.
Speaking at the Pakistan Policy Dialogue in Islamabad, Aurangzeb said some departures were unavoidable, given the dilapidated economic situation.
“There are firms which are also leaving, that is true,” he said. “If the taxation is high or the energy cost is high, or the financing cost is always moving in the wrong direction, those have been real issues.”
However, he also noted that 20 new foreign investors, including Google, Aramco, Wafi Energy, Turkish Petroleum, and others had entered the Pakistani market in the last 18 months.
The finance minister argued that the survival or exit of multinational firms often depended on how successfully they adapted their business models.
Some companies, he said, had shifted to local sourcing, stabilised margins and even begun exporting from Pakistan, stating “Because of that their margins are fine, they are now able to export, therefore they stay.”
Others that failed to adapt, he added, needed to “think through” their approach.
Aurangzeb said structural reforms were under way across the economy, with particular emphasis being placed on the overhauling of the Federal Board of Revenue.
He stressed that while tax policy now sits with the Ministry of Finance, the FBR’s core responsibility is revenue collection. “Compliance and enforcement are essential to ensure implementation of tax laws,” he said.
Turning to state-owned enterprises, Aurangzeb said inefficiencies were costing the country nearly PKR1 trillion (about $3.6 billion) a year. “According to a report, we are losing close to a trillion rupees every single year, and we can put it to much better use,” he said.
As part of cost-cutting and reform efforts, he said several entities, including Utility Stores, the Pakistan Public Works Department and PASCO, had been shut down due to what he described as corruption in subsidy schemes.
He added that 24 organisations had been handed over to the Privatisation Commission, noting that the privatisation process for Pakistan International Airlines had attracted interest from local investors.
Regarding the outstanding public debt, Aurangzeb said interest payments remained the single largest expenditure item, but recent steps were beginning to yield savings.
A newly established Debt Management Office, he said, has helped the country save PKR85 billion ($300 million) in interest payments last year, with similar savings expected in the current fiscal year.
