By Staff Reporter
KARACHI: Pakistan expects its economy to grow more than 4% this fiscal year and aims to privatise five or six state-run entities that could raise over $1 billion, Finance Minister Muhammad Aurangzeb said.
Aurangzeb, speaking to Reuters on Monday on the sidelines of the International Monetary Fund and World Bank annual meetings in Bangkok, said the country has secured enough fuel to avoid shortages and that critical sectors such as agriculture are holding up despite elevated oil prices.
“So I’m still quite clear that we should clock north of 4 percent,” he said. “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.”
The forecast comes as the war with Iran, now in its eighth month, keeps energy markets under strain. Pakistan, a country of 255 million people, is considered highly vulnerable to a prolonged Middle East conflict because of its dependence on Gulf energy imports, remittances and financing support from the region. It also relies on external funding to bolster foreign-exchange reserves and meet debt repayments.
The IMF said last week that its staff reached an agreement with Pakistan that could unlock about $1.21 billion, subject to approval by the fund’s executive board. The money would comprise roughly $1 billion under the Extended Fund Facility and $210 million under the Resilience and Sustainability Facility, lifting total disbursements under the two programs to about $5.7 billion.
An IMF team led by mission chief Iva Petrova held talks with Pakistani officials in Karachi and Islamabad from Sept. 23 to Oct. 7. The fund said Pakistan’s current account was broadly balanced in the fiscal year that ended in June, supported by strong remittances, and that gross reserves rose to about $21.5 billion by the end of September. It also flagged risks from geopolitical tensions and volatile energy prices.
The $7 billion, 37-month Extended Fund Facility, signed in 2024, has helped the cash-strapped economy recover some of its footing after a period of severe turmoil exacerbated by the Covid-19 pandemic. The program includes tough measures such as higher tax revenue from farm income.
Pakistan is also continuing talks with the US on a proposed $10 billion exchange stabilization facility, Aurangzeb said, though he declined to give a time frame for concluding negotiations. Islamabad requested the facility from US Treasury Secretary Scott Bessent, Reuters reported in July, citing a person briefed on the matter. Aurangzeb said in August that a decision was expected by September.
Bessent is skipping the Bangkok meetings and sent two senior officials in his place, Reuters has reported, citing a US official.
The facility is in addition to ongoing talks with the Export-Import Bank of the United States and the US International Development Finance Corp.
“If it comes through, this will be a great help for us,” Aurangzeb said. “If it doesn’t come through, this does not, you know, create any problem for us in terms of access to market.”
Privatisation Pipeline
Following the sale of flag carrier Pakistan International Airlines last year, the government has about another dozen entities in the pipeline, Aurangzeb said. They include 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 is seen as a key test of Pakistan’s reform credibility with the IMF. Officials have previously said that failure to offload loss-making state firms risks renewed pressure on public finances.
“We are quite clear that we want the private sector to lead the country,” Aurangzeb said. “So our role is to help support, assist any way we can in terms of the ecosystem.”
The Bangkok meetings, which run through Saturday, are the first held outside Washington in three years. The war, which began Feb. 28, and the inflation it has fueled will dominate the agenda. World Bank President Ajay Banga told Reuters that global growth has held up better than feared after Iran closed the Strait of Hormuz, which handles about 20% of the world’s oil, though pressures are building again.
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