Pakistan Targets 3.5% Growth, Bolsters Economic Stability

ISLAMABAD: Pakistan has solidified its macroeconomic stability through rigorous fiscal discipline, bolstered foreign exchange reserves, and declining inflation, while targeting 3.5% growth for FY26, Finance Minister Muhammad Aurangzeb declared in a CGTN America interview.

Aurangzeb highlighted “significant strides” since the International Monetary Fund (IMF) greenlit a $7 billion program last year, noting that Fitch, S&P, and Moody’s upgraded Pakistan’s outlook for the first time in nearly three years. “Foreign exchange reserves now cover 2.5 months of imports, inflation has dropped to single digits, and the policy rate has been halved,” he affirmed, citing the IMF’s second review completion and staff-level agreement under the Extended Fund Facility.

He credited reforms in taxation, energy, public finance, and privatisation for earning the IMF’s confidence in Pakistan’s economic stewardship. “We’re grateful for the IMF’s trust, particularly in our structural reforms,” Aurangzeb stated.

Pakistan re-entered international capital markets after a two-year hiatus, securing funds from Middle Eastern banks and preparing a debut Panda bond by year-end. “We repaid a $500 million Eurobond last month without market alarm, and a $1.3 billion repayment due in April 2026 is manageable,” he added.

Reviving a stalled privatisation agenda, Aurangzeb noted the recent sale of a small bank to a UAE-based conglomerate, with plans to digitize and expand its operations. He expressed optimism about Pakistan International Airlines (PIA)’s privatisation before FY26 ends.

Addressing recent floods, Aurangzeb said growth projections were revised from over 4% to 3.5% due to damage to rice and cotton crops across three major rivers. “Climate change is an existential threat for Pakistan,” he warned, yet remained upbeat: “We achieved 3% growth last year and expect 3.5% despite the floods.”

Commenting on Prime Minister Shehbaz Sharif’s China visit, Aurangzeb announced the launch of CPEC Phase 2.0, shifting from infrastructure to industrial and private-sector development. “Phase 1 built infrastructure; Phase 2.0 monetizes it via Special Economic Zones and partnerships,” he explained, citing 24 joint venture agreements.

CPEC 2.0 prioritizes minerals, mining, agriculture, IT, AI, and pharmaceuticals, including local vaccine production with Chinese firms. He spotlighted the Service Long March tyre manufacturing venture, noting 80% exports and potential Hong Kong Stock Exchange listing.

Aurangzeb emphasized the government’s digitisation drive, led by the Prime Minister, which boosted the tax-to-GDP ratio from 8.8% to 10.2% using AI-driven monitoring and analytics. “Digitisation formalizes our cash economy,” he asserted, underscoring tax and data reforms for fiscal sustainability and transparency.

He highlighted a 19% tariff arrangement with the United States, boosting textile exports, particularly home textiles, and growing trade with Central Asian republics like Azerbaijan, Uzbekistan, and Kazakhstan for South-South diversification.

At the SCO summit in Tianjin, Aurangzeb endorsed President Xi Jinping’s Global Governance Initiative, advocating sovereign equality, rule of law, and multilateralism. “These principles foster a cooperative world order,” he remarked.

Aurangzeb concluded that Pakistan’s economic progress—driven by enhanced reserves, reforms, and global engagement—signals robust confidence in its recovery trajectory.