Pakistan shifts from aid to investment as economic reforms gain credibility

Aurangzeb cites stabilisation, remittances, reforms

ISLAMABAD:

Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb has said Pakistan is no longer seeking aid-based support and is shifting decisively towards trade- and investment-led engagement to secure long-term economic sustainability and mutually beneficial partnerships, especially with Gulf Cooperation Council (GCC) countries.

In an interview with CNN Business Arabia, he said this strategic direction, clearly articulated by the prime minister, reflects renewed economic confidence and reform momentum. He noted that Pakistan has remained on a comprehensive macroeconomic stabilisation programme for 18 months, producing measurable results. Inflation, which had peaked at 38%, has now fallen to single-digit levels.

He said Pakistan has achieved primary fiscal surpluses, while the current account deficit remains within targeted limits. The exchange rate has stabilised and foreign exchange reserves have improved to roughly 2.5 months of import cover, signalling stronger external buffers.

Aurangzeb highlighted two external validations of Pakistan's improving economic outlook. All three major international credit rating agencies upgraded Pakistan's ratings and outlook this year. Pakistan also completed the second review under the IMF Extended Fund Facility, receiving Executive Board approval earlier this week. These developments, he said, demonstrated growing international confidence in Pakistan's economic management.

The minister said stabilisation has been achieved through coordinated monetary and fiscal policies combined with an ambitious structural reform agenda. Reforms are being implemented across taxation, energy, state-owned enterprises (SOEs), public financial management and privatisation to consolidate stability and support sustainable growth.

On taxation, he noted progress in raising the tax-to-GDP ratio from 8.8% at the start of the reform programme to 10.3% last fiscal year, with a projected path towards 11%. The government aims to achieve medium- to long-term fiscal sustainability by widening the tax base to include undertaxed but economically significant sectors such as real estate, agriculture and wholesale and retail trade. Compliance measures are being strengthened through production monitoring systems and AI-enabled technologies, while tax administration reforms are under way in people, processes and technology.

In the energy sector, he pointed to efforts to improve governance in distribution companies, involve private sector expertise, advance privatisation and reduce circular debt. Rationalising the tariff regime, he said, is essential for strengthening industrial competitiveness and enabling economic recovery.

Aurangzeb acknowledged longstanding support from GCC countries, including Saudi Arabia, the UAE and Qatar, noting their critical role through financing, deposits and cooperation at institutions such as the IMF. This partnership, he said, is now evolving towards trade expansion and investment flows. Remittances remain vital for the current account, reaching about $38 billion last year and projected to rise to $41-42 billion this year, more than half originating from GCC states.

He 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 expressed optimism about progress on a Free Trade Agreement with the GCC, saying discussions were at an advanced stage.

Reiterating the government's direction, he said Pakistan's future lies in promoting trade and investment rather than reliance on aid. Foreign direct investment into productive sectors, he said, will support higher GDP growth, create jobs and generate shared economic benefits for Pakistan and its partners.

Separately, Pakistan and the Asian Development Bank (ADB) on Monday reaffirmed their strategic partnership to accelerate structural reforms, enhance development impact and promote private sector-led growth. According to a finance ministry press release, Aurangzeb held a meeting with an ADB delegation led by Country Director Emma Fan and Director General Leah Gutierrez.

Welcoming the delegation, Aurangzeb expressed appreciation for ADB's support in budgetary assistance, climate resilience, social development and reforms. He stressed the need for an impact-led, KPI-driven partnership, noting that delays in project execution had historically diluted outcomes. The meeting reviewed Pakistan's stabilisation efforts under the IMF programme, with the minister citing improved credit ratings, successful IMF reviews and the approval of the Climate Resilience Facility as indicators of progress.

ADB representatives expressed appreciation for Pakistan's reform momentum and confirmed readiness to provide further budget support aligned with the IMF programme. Both sides reaffirmed commitment to deepening the partnership with a focus on private sector development, institutional strengthening and sustainable growth.