- Inflation falls to double digits from a peak of 38%.
- Primary surpluses and reserves strengthen external buffers.
- Rating agencies upgrade Pakistan’s outlook this year.
Finance Minister Muhammad Aurangzeb has said that Pakistan is shifting away from aid-based support to trade- and investment-driven engagement with a focus on deeper economic partnerships with Gulf Cooperation Council (GCC) countries.
In an interview with CNN Business ArabiaAurangzeb said the strategic shift, which he said has been clearly articulated by Prime Minister Shehbaz Sharif, reflects Pakistan’s renewed economic confidence and reform momentum, aimed at long-term economic sustainability.
He said Pakistan has remained on a comprehensive macroeconomic stabilization program over the past 18 months that has delivered what he described as “tangible and measurable” results. Inflation, which he said had peaked at an unprecedented 38%, has fallen to double-digit levels.
Aurangzeb also pointed to primary surpluses, a current account deficit “well within” targeted limits, a stabilized exchange rate and foreign exchange reserves improving to about 2.5 months of import coverage, which he said reflected strengthening of external buffers.
The finance czar cited two external validations of Pakistan’s improved outlook. He said that all three international credit rating agencies have upgraded Pakistan’s ratings and outlook this year and that Pakistan has completed the second review under the International Monetary Fund’s (IMF) Extended Fund Facility (EFF), with the IMF’s executive board giving its approval earlier this week, developments which he said signaled growing international confidence in Pakistan’s economic governance and reform process.
The finance minister said macroeconomic stabilization has been achieved through a coordinated approach combining disciplined monetary and fiscal policy with an ambitious structural reform agenda. He said reforms are being pursued across taxation, energy, state-owned enterprises, public financial management and privatization to consolidate stability and lay the foundation for sustainable growth.
On taxation, the finance minister said Pakistan’s tax to GDP ratio has improved from 8.8% at the start of the reform program to 10.3% in the last financial year, with a clear path towards 11%.
He said the government’s goal is to achieve a level of tax collection that ensures fiscal sustainability in the medium to long term by broadening the tax base and bringing previously undertaxed but economically significant sectors, including real estate, agriculture and wholesale and retail trade, into the formal net.
He said the plan also includes deepening compliance by reducing leakages through production monitoring systems and AI-enabled technologies, along with reforms in people, processes and technology to transform tax administration.
In the power sector, Aurangzeb highlighted efforts to improve governance in distribution companies, bring in expertise from the private sector, promote privatization and reduce circular debt, which he said has long constrained the power sector. He said rationalization of the tariff regime is essential to make energy more competitive for the industry, support industrial revival and economic growth.
Acknowledging the long-standing support of GCC countries, including Saudi Arabia, the United Arab Emirates and Qatar, the senator noted their role in supporting Pakistan through funding, financing and cooperation in international financial institutions such as the IMF. He said the relationship is now evolving towards a new phase centered on trade expansion and investment flows.
He said remittances continue to play a crucial role in supporting the current account, with inflows of about US$38 billion last year and expected to rise to US$41-42 billion this year, with more than half coming from GCC countries.
Looking ahead, Aurangzeb said Pakistan is engaging GCC partners to attract investment in priority sectors including energy, oil and gas, minerals and mining, artificial intelligence, digital infrastructure, pharmaceuticals and agriculture. He also expressed optimism about progress on a free trade agreement with the GCC, saying discussions are at an advanced stage.
Echoing the government’s direction, the finance minister said Pakistan’s future lies in fostering trade and investment partnerships rather than reliance on aid, arguing that foreign direct investment in productive sectors would support higher GDP growth, create employment and deliver shared economic benefits for Pakistan and its partners.
He said the government is fully mobilized to turn the vision into reality.
