Optimism Surrounds Potential Reversal of US Tariffs

Finance Minister Muhammad Aurangzeb conveyed optimism regarding the potential reversal of the 29% reciprocal tariff imposed by the United States. During a press briefing held at Federation House on Wednesday, the minister announced that Pakistan plans to dispatch a high-level delegation to the US soon to engage in discussions about tariffs and various trade-related matters.

Aurangzeb emphasized that the existing challenge with the US primarily concerns the trade imbalance rather than just the tariffs themselves.

Addressing the Trade Imbalance

“The current trade scenario reveals that Pakistan’s exports to the United States amount to $5 billion, while imports stand at only $2.1 billion,” Aurangzeb pointed out. He added, “The primary goal of this delegation is to rectify this imbalance by increasing imports in sectors such as soybean and cotton, thereby fostering a more equitable trade relationship.”

Anticipated Decrease in Electricity Prices

The finance minister also provided encouraging updates on electricity prices, indicating that tariffs have already seen a reduction and that further decreases are anticipated to be announced in July 2025.

No Tax Exemptions in the Forthcoming Budget

Aurangzeb clarified that the forthcoming budget would eliminate exemptions for all sectors. “It is imperative that every entity contributes through taxes,” he stated. He acknowledged that salaried individuals currently account for 70% of income tax revenue and assured that the new budget would offer relief to this demographic.

Discussions with International Institutions

Aurangzeb highlighted that his recent visit to the United States involved participation in over 70 significant meetings, including dialogues with entities such as the International Monetary Fund (IMF), the World Bank, China, and Saudi Arabia. He noted that these institutions have recognized positive macroeconomic trends in Pakistan’s economy.

Pakistan’s foreign exchange reserves have now risen to $14 billion, and the current account is projected to remain in surplus.

The Monetary Policy Committee is slated to convene on May 5 to deliberate on further reductions in interest rates.

He expressed his hope that the ongoing 24th IMF program would be Pakistan’s last.

He further underscored the importance of several sectors to the national economy, mentioning that the textile industry remains paramount, while IT, agriculture, pharmaceuticals, furniture, and the automotive sector also contribute significantly to exports.

“Pakistan’s IT exports currently amount to $3.2 billion, with the potential to increase to $8 billion in the coming years,” Aurangzeb projected.

He also referenced ongoing discussions with the Exim Bank and other financial institutions regarding the Reko Diq mining project, which has an estimated annual potential of $2.8 billion.

Moreover, efforts are underway concerning web 3.0 and Blockchain technology, with the legal framework currently in development.

Regarding the closure of the transit corridor to Central Asia for India, he observed that conflict is not beneficial to any nation and that such actions would adversely affect Indian transit trade.

Earlier, FPCCI acting President Saqib Fayyaz questioned the lack of further interest rate reductions despite favorable economic indicators.

Saqib Fayyaz’s Concerns

“Why aren’t interest rates decreasing more significantly? Is maintaining the current rate necessary to maintain economic growth and manage payments effectively?” he asked.

Saqib highlighted challenges faced by exporters since being removed from the fixed tax regime in the previous budget.

“The export sector has experienced negative repercussions from the normal tax regime.

Additional taxes are diminishing tax collection rather than augmenting it, and we’re observing issues related to fraudulent invoices,“ he added.

The FPCCI leader lauded the government and SIFC for their endeavors, noting that exports had increased by 7.7 percent to $24.6 billion in the initial nine months of fiscal year 2025. However, he noted that the trade deficit had expanded by 4.5 percent.

“We extend our gratitude to overseas Pakistanis, who have aided in managing this deficit by remitting $28 billion,” he acknowledged, suggesting that “the forthcoming budget should incorporate a specific package designed for overseas Pakistanis.”

Meanwhile, Asif Sakhi, vice president, urged the prime minister and chairman of the FBR to conduct a forensic audit of the five-month progress of the faceless assessment system (FAS), and also recommended carrying out revenue evaluation of 50% of green channel clearance under the FAS.