ISLAMABAD: Finance Minister Muhammad Aurangzeb on Monday cautioned that the ongoing Middle East conflict has implications for inflation and GDP growth; however, he remains hopeful of pushing GDP growth beyond four percent this fiscal year as the economy shifts from stabilisation to growth.
Speaking at the “Partnerships That Power Progress” event organised by the Export-Import Bank of Pakistan (EXIM Bank) in Islamabad, the minister said Pakistan had entered a new phase, but the key challenge was no longer simply achieving growth — it was ensuring that growth was sustainable.
“It’s obviously a function of the ongoing conflict, which has implications for inflation and GDP,” Aurangzeb said, expressing hope that the country’s leadership would be able to contribute to a permanent solution to the conflict sooner rather than later.
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He said Pakistan recorded GDP growth of around 3.7 percent during the last fiscal year and the government was hopeful of taking it beyond four percent in the current fiscal year.
Aurangzeb said Pakistan had repeatedly experienced boom-and-bust cycles because of its dependence on imports. Whenever the economy reached a certain growth rate, rising import dependence generated balance-of-payments pressures, eventually forcing the country to approach the lender of last resort.
He said the country now had a “fantastic opportunity” to break this cycle, pointing out that the twin structural deficits that had historically constrained the economy had been significantly reduced.
The fiscal deficit, he said, had fallen from a peak of 12.5 percent to 2.6 percent and was now at a 22-year low. Pakistan had also recorded primary surpluses for the last three years and posted a current account surplus during the previous fiscal year. Given the growth in large-scale manufacturing and other economic indicators, the country was now broadly balanced on the current account at the end of the fiscal year.
“The challenge for us is not growth. It is the sustainability of that growth,” the finance minister said.
He reiterated that sustainable growth would have to be export-led and private-sector-led, with the government’s role being to provide the necessary ecosystem and enabling environment.
Aurangzeb said the government was focused on utilising the fiscal and external-account space currently available to move the economy forward through export-led growth.
He said the federal budget passed by Parliament at the end of June had provided a clear direction on how the government intended to support exports.
The measures included reducing super tax, with the rate brought down to zero for companies exporting more than 80 percent of their output, doing away with advance tax and efforts by the Power and Petroleum divisions to make energy costs more competitive.
He acknowledged that more work was required on energy costs but said the government was moving in the right direction.
On export financing, Aurangzeb said exporters were now receiving financing at a rate of 4.5 percent, despite the policy rate having edged up to 11.5 percent, partly because of imported inflation linked to the conflict.
He said the availability of financing at 4.5 per cent had effectively addressed the long-standing debate over whether Pakistan offered competitive financing compared with regional economies.
“Because irrespective of where the policy rate is, the financing is now being made available at 4.5 percent,” he said.
The minister said this was where the role of Pakistan EXIM Bank became critical, as the institution was an important enabler for channelling export refinance and long-term financing facilities enabled through the federal budget.
He stressed, however, that concessional financing should not be restricted to large exporters. Small and medium enterprises form an integral part of export value chains and supply chains, and therefore need access to subsidised financing as well.
He said a specific allocation had been made for SMEs so that businesses supplying larger exporters could also benefit from subsidised financing. Such support, he added, was necessary to expand Pakistan’s export capacity and allow more enterprises to enter international markets.
Aurangzeb said Pakistan also needed to diversify its export base, both in terms of products and services and in terms of export markets.
He said the country could not continue relying primarily on traditional export sectors and needed to develop new products and services while entering new international markets.
The minister noted that Pakistan’s IT exports had already made significant progress, reaching around USD 4.6 billion, while freelancers were contributing approximately USD 1.7 billion.
However, he cautioned that the country required a much larger expansion in goods exports. Marginal increases over the existing export base, he said, would not be sufficient to meet Pakistan’s economic requirements.
The quality of export growth would therefore depend not only on increasing volumes but also on entering new markets and developing new products and services.
The minister said the government was seeking to build a comprehensive ecosystem for sustainable, private-sector-led and export-driven growth.
He described the launch of the Export Development Fund (EDF) SME Risk Pool and the reinsurance partnership between the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) and Pakistan EXIM Bank as an important milestone in translating the government’s export strategy into practical action.
Aurangzeb said the ICIEC reinsurance partnership would bring international expertise in credit and political-risk mitigation to Pakistan EXIM Bank, enhancing its capacity, confidence and credibility.
He said Pakistan should benefit from international best practices instead of “reinventing the wheel”, adding that such partnerships would accelerate institutional development in export financing and risk management.
He said the EDF’s shared risk pool would strengthen domestic risk-sharing mechanisms, particularly for SMEs, and enable the fund to serve its intended purpose of supporting Pakistan’s export base.
Aurangzeb termed the initiative significant because it addressed the “how” of export-led growth after years of discussion about its need and objectives.
He stressed that no single institution could deliver the required transformation on its own. An integrated ecosystem involving exporters, commercial banks, EDF, EXIM Bank, the State Bank of Pakistan and the government was required.
“This has to be the entire ecosystem,” he said, emphasising the need to simultaneously build institutional capacity and expand both the quantum and quality of exports.
The finance minister assured exporters, financial institutions and other stakeholders that the Ministry of Finance was committed to providing the necessary support and assistance, describing export-led growth as the foundation of Pakistan’s future economic paradigm.
He expressed confidence that the partnerships launched through the event would enable EXIM Bank and its partner institutions to play a more effective role in strengthening Pakistan’s export ecosystem and translating the government’s export-led growth policy into sustainable economic outcomes.
Aurangzeb witnessed the signing of two agreements: a Reinsurance Agreement between ICIEC and Pakistan EXIM Bank and a Rs 3 billion SME Risk-Pool Agreement between Pakistan EXIM Bank and the Export Development Fund.
President and CEO of Pakistan EXIM Bank Shahbaz H Syed, Chairman EDF Omar Saeed, CEO ICIEC Dr Khalid Khalafalla and Secretary Economic Affairs Muhammad Humair Karim also spoke on the occasion and highlighted various aspects of the agreements and their significance for achieving export-led growth.
Copyright Business Recorder, 2026