'Economy has hit turning point'

Finance minister cites fiscal, current account surpluses and export-led shift

ISLAMABAD:

Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb has said Pakistan has reached a critical turning point, with macroeconomic stability, sustained reforms and policy continuity restoring confidence and steering the economy towards export-led, long-term growth.

In an interview with USA Today, the minister said the improved outlook was opening new horizons for domestic and global investors and positioning the country for sustainable economic expansion. He said the transition had been enabled by macroeconomic stabilisation, easing inflation and improved external balances, alongside reforms focused on productivity-led growth.

Aurangzeb said Pakistan entered fiscal year 2025 from a position of renewed strength, marked by improving external balances and a firm commitment to structural reform. For the first time in several years, he noted, the country achieved both a primary fiscal surplus and a current account surplus, signalling a decisive shift away from recurring deficits.

Strong remittance inflows supported the turnaround, while inflation fell sharply from a peak of 38% to single-digit levels. Foreign exchange reserves have risen to over $14.5 billion, providing import cover of around two and a half months, and a stable exchange rate has helped restore investor confidence.

The finance minister emphasised that while stabilisation was an essential foundation, sustainable growth remained the central challenge. Economic growth of 2.7% in the previous fiscal year, though positive, was insufficient to meet the needs of a rapidly growing population.

He said Pakistan was consciously moving away from a consumption- and debt-driven model towards an export-led strategy. The current budget, he explained, reflects this shift through reforms in taxation, energy pricing and state-owned enterprises, alongside tariff reforms aimed at dismantling decades of protectionism and improving global competitiveness.

Aurangzeb said Pakistan was aligning its economic strategy with changing global demand patterns, identifying information technology services, textiles and agricultural exports as priority sectors. IT exports have already crossed $4 billion and could double within five years with sustained regulatory clarity and infrastructure development. Efforts are also underway to simplify tax regimes for exporters and reduce bureaucratic hurdles to support productivity.

Addressing the broader reform agenda, he said privatisation of state-owned enterprises, tariff liberalisation and restructuring of the energy sector were designed to address deep-rooted inefficiencies that have historically strained public finances. These reforms, he added, align with the World Bank's assessment of Pakistan's potential "East Asia moment," reflected in a ten-year Country Partnership Framework focusing on economic reform, climate resilience and population management.

The minister said Pakistan's future also depended on addressing challenges beyond fiscal indicators, including population growth, climate change, child stunting, learning poverty and the exclusion of girls from education. He stressed that increasing women's participation in education and the workforce was both a social imperative and an economic necessity.

While acknowledging risks such as global commodity price shocks, external debt pressures and political uncertainty, Aurangzeb reaffirmed the government's commitment to staying the reform course and invited global investors to engage with Pakistan through trade and investment.