Pakistan's economy is expected to grow by more than 4% this fiscal year despite elevated oil prices, as the government looks to push for the privatisation of five to six entities that could raise upwards of $1 billion, Finance Minister Muhammad Aurangzeb said. Pakistan's economy is considered to be highly vulnerable to a prolonged Middle East conflict given its dependence on Gulf energy imports, remittances, and financing support from the region, even as it remains reliant on external financing to bolster foreign exchange reserves and meet debt repayments.
The South Asian country of 255 million people has been able to procure adequate quantities of fuel, successfully avoiding any shortages, and critical sectors such as agriculture were holding up, Aurangzeb said. "So I'm still quite clear that we should clock north of 4%," he said in an interview on the sidelines of the annual meetings of the International Monetary Fund (IMF) and World Bank in Bangkok.
"And on the inflation side, obviously, we are keeping a very close eye because it does have a knock-on impact in terms of the commodity prices." Following a period of severe economic turmoil exacerbated by the COVID-19 pandemic, the cash-strapped economy has recovered some of its footing, supported by a $7 billion, 37-month IMF loan program known as the Extended Fund Facility (EFF) signed in 2024 that includes some tough measures such as raising tax revenue on farm income.
The war in the Middle East and the inflation and hardship it has caused will dominate the agenda during the meetings that are being held outside Washington for the first time in three years. Pakistan, which reached a staff-level agreement with the IMF last week, potentially unlocking about $1.21 billion in financing under the EFF and a climate program, is continuing discussions with the United States for a proposed $10 billion exchange stabilisation facility, Aurangzeb said.
But he declined to provide a time frame for the conclusion of negotiations. "If it comes through, this will be a great help for us," he said, referring to the facility, which is in addition to ongoing talks with the Export-Import Bank of the United States (EXIM) and the US International Development Finance Corporation (DFC).
"If it doesn't come through, this does not create any problem for us in terms of access to market." Following the privatisation of flag carrier Pakistan International Airlines (PIA) last year, Aurangzeb said the government has around another dozen entities in the pipeline, including state-owned power distribution companies and the outsourcing of airport operations.
"I expect about five or six of these to go through during this fiscal year," he said, adding that they could raise more than $1 billion. Privatisation has been seen as a key test of Pakistan's reform credibility with the IMF, with officials previously underlining that failure to offload loss-making state firms risked renewed pressure on public finances.
"We are quite clear that we want the private sector to lead the country," said Aurangzeb. "So our role is to help support, assist any way we can in terms of the ecosystem."
The government remains committed to structural reforms to ensure long-term stability. By offloading these entities, the administration aims to reduce the fiscal deficit and improve the efficiency of public services, which have long been a burden on the national exchequer.
As the global economic landscape shifts, Pakistan's focus on attracting foreign investment and streamlining its state-owned enterprises remains a cornerstone of its economic strategy to achieve sustainable growth in the coming years.