Budget, Mideast peace deal to support FY27 growth, says Aurangzeb

Pakistan is poised to transition from macroeconomic stability to sustainable, export-driven growth in FY27, Finance Minister Muhammad Aurangzeb said on Monday, crediting the federal budget and a Pakistan-brokered US-Iran peace deal with improving the country’s economic outlook.

Pakistan’s top leadership has successfully brought the over three months long Middle East conflict to an end. The resolution “presents us [with] a good upside in terms of the next fiscal year [FY27],” Senator Aurangzeb said while speaking virtually during Service Long March’s (SLM) listing at the Pakistan Stock Exchange (PSX).

“The budget that was announced and presented on Friday has given a very clear direction for moving from macroeconomic stability towards sustainable and export-led growth.”

Aurangzeb announced in his budget speech that his government had set the country’s economic growth target at 4% for FY27 compared to estimated 3.7% in the outgoing FY26.

The country’s economy remained in a stabilisation phase over the past three years, as a six-decade high inflation reading recorded at 38% in May 2023 had badly impacted GDP (gross domestic product] growth in those inflationary years.

The United States and Iran have reached a deal to end their war and will hold an official signing ceremony on Friday in Switzerland.

“We have negotiated over the last three months of this [US-Iran] conflict - the first order impact [helping de-escalate geopolitical tension at first]. This [peace deal] announcement while you know as sort of, we move forward it should help us God willing in mitigating the second and the third order impact that was being feared previously.”

Under the second and third order impacts, the country’s economy and the global economy were bound to face high inflation, further increase in cost of doing business, continued disruption in world trade and shipping and compromise growth, if the war was to prolong over a longer period, it was learnt.

“It will take a little while for things to get normal. But it [peace deal] presents us a good upside in terms of next fiscal year.”

The finance minister recalled the Service Long March - a joint venture between Chinese and Pakistani companies - was established during Covid-19.

SLM made the second largest initial public offering (IPO), raising Rs7.78 billion equity at PSX recently. The company “is going to get to about $100 million mark of exports, God willing, next year [FY27],” he said.