FinMin says stabilizing Pakistan’s economy expects GDP growth of 3.5% this year

• He says inflation has come down to single digits, policy rates have eased.
• Major foreign exchange reserves cover well for 2.5 months of imports.
• All 3 rating agencies have upgraded Pakistan’s credit outlook.

Pakistan expects its economy to grow by 3.5 percent this fiscal year despite flood-related setbacks, Finance Minister Muhammad Aurangzeb said in an interview in CGTN America Talk show ‘Heat’, citing improved stability, lower inflation and stronger foreign reserves.

Aurangzeb said the current government’s economic measures are paying off as inflation has been in single digits and the central bank’s monetary stance has been loose. “Our foreign exchange reserves are sufficient to cover two and a half months of imports,” the finance czar said.

Economic performance has won international recognition, with all three major global rating agencies recently upgrading the country’s credit outlook, according to the finance minister.

The minister said Pakistan’s gross domestic product (GDP) grew by 3 percent in the last financial year and economic fundamentals continued to strengthen.

“The target for growth this year has been set at above 4%, although it may be slightly affected by the recent floods,” the finance minister said.

Aurangzeb also highlighted progress on the second phase of the China-Pakistan Economic Corridor (CPEC), saying 24 joint projects were recently signed in Beijing. “Also, new investment opportunities are being considered,” he added.

Pakistan and the International Monetary Fund (IMF) have reached a staff-level agreement on a loan program that would allow the country to access $1.2 billion after approval by the fund’s board.

The IMF will provide Pakistan with $1 billion under its expanded facility and $200 million under the Resilience and Sustainability Facility, bringing total disbursements under the two agreements to about $3.3 billion.

Countries under IMF lending programs must pass regular reviews, which, once signed off by the fund’s executive board, trigger loan tranche payments.

“Supported by the EFF, Pakistan’s economic program is consolidating macroeconomic stability and rebuilding market confidence,” the fund said in a statement.

The IMF said the South Asian nation’s recovery remains on track, with inflation remaining subdued, external buffers strengthening and financial conditions improving as sovereign bond spreads narrowed significantly.

Pakistan is also committed to maintaining an appropriately tight and data-driven monetary policy and strengthening climate resilience in the wake of recent devastating floods.

Aurangzeb had said earlier this month that the country was set to sign a preliminary agreement with the IMF after an IMF team left Pakistan last week without signing any agreements.

In an interview, he said the government now plans to return to the capital markets, starting with the first green bond in Chinese yuan before the end of the year, followed by an international bond of at least $1 billion.

IMF support in September 2024 helped prop up Pakistan’s $370 billion economy after a severe financial crisis sent its currency into a slump.

—Additional data from Reuters