By Staff Reporter
KARACHI: Finance Minister Muhammad Aurangzeb said the country’s economic outlook has improved following the US-Iran framework agreement, but cautioned that budget projections would not be revised until the full scope of supply-chain damage from the conflict becomes clear.
Speaking to Reuters hours after Washington and Tehran signed their accord, Aurangzeb said energy infrastructure damage sustained during the conflict had disrupted supply chains in ways that would take time to unwind, even as global oil prices fell to around $80 a barrel.
“We were looking at how we manage the second, third-order impact in case this conflict continues,” he said. “The energy infrastructure has been hit. And therefore, it will take time before we return to normalcy in terms of supply chains.”
Aurangzeb acknowledged that the end of hostilities had opened the door to better-than-projected economic performance. “I do see upsides in what we have projected for next year,” he said, adding that it would be “way too premature” to revise the budget at this stage.
Pakistan’s FY27 budget, tabled in parliament last Friday, targets GDP growth of 4% and average inflation of 8.2%. Defence spending was raised 18% to Rs3 trillion, while revenue assumptions were set to keep a $7 billion IMF programme on track. In subsequent televised remarks, Aurangzeb revised his inflation forecast slightly lower, to 7.5%, suggesting early confidence that falling energy costs could provide relief.
The minister said Islamabad may tap commercial borrowing markets in FY2026–27 to restructure its creditor profile without adding to total external debt, which he said had fallen to $96–$97 billion. He noted that 40–45% of that stock was owed to multilateral lenders, with the remainder held by bilateral partners, including China.
Tax Overhaul and the Trader Problem
Aurangzeb used various private television appearances on Tuesday to reframe the government’s controversial Tax Asaan Scheme for traders as a structural inflection point rather than a concession. The scheme imposes a 1% tax rate on traders — a sector that has historically operated almost entirely outside the formal tax net.
“We kept the tax rate at 1% for traders because we have to start somewhere,” he said. “However, it is part of a broader framework to expand the tax net, and we are moving in the right direction.”
The minister said the government was developing a new operating model for tax collection that would eliminate discretionary powers for income tax officers — a persistent source of both corruption and taxpayer resentment. A Central Processing Unit would oversee compliance using data compiled from third-party sources and existing tax records.
“There will be a Central Processing Unit that will monitor everything,” he said. “We have comprehensive data.”
Aurangzeb said the government would focus the FY27 fiscal cycle on “enforcement and compliance” rather than new levies, noting that significant new taxes had already been introduced in each of the two preceding fiscal years.
He also flagged progress on a digital product monitoring system piloted in the sugar sector — a politically sensitive move he said was initiated at Prime Minister Shehbaz Sharif’s direction despite the premier’s family having business interests in the sector. The system is now being extended to beverages and textiles.
Tax revenues, the minister said, had doubled from Rs7 trillion in FY25 to Rs13 trillion in FY26. “Has it ever happened in history?” he said.
Freelancers, Blockchain, and the Crypto Question
Aurangzeb also outlined a broader digital economy agenda, arguing that Pakistan’s freelancing community — which he described as the third-largest in the world — was leaving significant income on the table by limiting itself to conventional coding work.
“The Pakistani freelancing community is earning $10 to $12 per hour for coding,” he said. “Through upskilling or reskilling in blockchain technology, they can earn between $50 and $250 per hour.”
He framed the shift as essential to Pakistan’s positioning in a global economy increasingly organized around Web 3.0, artificial intelligence and cryptocurrency infrastructure. On the question of whether cryptocurrency is legal in Pakistan — a point of public confusion — Aurangzeb said the government was moving toward formal regulation and tokenisation rather than prohibition.
Geopolitical Dividend and the Iran Sanctions Wildcard
Aurangzeb struck a note of careful optimism about the wider regional implications of the US-Iran agreement, calling it both “a welcome development and a proud moment for Pakistan” and a “great moment for the global economy.”
He said oil prices falling to $80 a barrel represented a tangible near-term benefit the government had been working to pass on to consumers for three weeks. “We will definitely see an upside; however, we cannot quantify it,” he said.
On whether lifted sanctions on Iran could reshape Pakistan’s trade relationships, Aurangzeb was deliberately non-committal, saying further detail was expected to emerge from the formal agreement. “It would be premature to say anything about it,” he said. If sanctions were removed, however, Pakistan would “move with speed on that front.”
The minister said Pakistan was in active discussions with Washington about expanding bilateral economic cooperation in the post-deal environment.
Separately, he flagged the closure of the Afghan border as a drag on export momentum, while noting significant potential upside if the Taliban government “acts responsibly.”
UK Engagement, IMF Continuity, and Provincial Politics
In a formal bilateral meeting at the Finance Division in Islamabad, Aurangzeb briefed UK Parliamentary Under-Secretary of State for the Middle East, North Africa, Afghanistan and Pakistan, Hamish Falconer MP, along with British High Commissioner Jane Marriott, on the budget and reform agenda. The two sides discussed revenue mobilisation, compliance, anti-leakage measures and the modernisation of tax administration through data integration, centralised processing and digital invoicing.
Falconer acknowledged the “seriousness and breadth of Pakistan’s ongoing transformation agenda” and reaffirmed British interest in deepening economic engagement.
On the domestic political front, Aurangzeb dismissed allegations by a PPP lawmaker that budget details had been withheld before parliamentary presentation, saying all provisions were finalised through consensus. He also described productive meetings with Khyber Pakhtunkhwa Chief Minister Sohail Afridi and the province’s Finance Adviser Muzammil Aslam, saying KP had “significantly supported” the IMF programme throughout. He added that any decision on KP’s demand to link contributions to the centre with development budget cuts — and PTI founder Imran Khan’s approval — would ultimately rest with the prime minister.
The government’s debt-to-GDP ratio has fallen to 70%, Aurangzeb said, calling the trajectory “moving in the right direction.” Roshan Digital Accounts, which channel investment from the Pakistani diaspora, surpassed $300 million in May. Social spending through the Benazir Income Support Programme has been increased to Rs838 billion.
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