Key facts
- Pakistan's Finance Minister Muhammad Aurangzeb sees potential budget upside for FY27 due to the Iran deal's conclusion.
- Aurangzeb stated it is too early to revise the current budget, citing damaged energy infrastructure and supply chain disruptions.
- The conflict had pushed inflation back into double digits.
- Pakistan plans to tap commercial borrowing and explore international debt instruments like Panda bonds and Eurobonds.
- The government aims to reshape its creditor mix without increasing its overall external debt burden.
Pakistan's Finance Minister Muhammad Aurangzeb indicated that the country could see its economic projections for fiscal year 2027 improve following the conclusion of the Iran conflict. However, he cautioned that it is too early to revise the budget presented just days ago, as damaged energy infrastructure and supply chain disruptions would delay a return to normalcy.
The conflict had previously driven inflation back into double digits, Aurangzeb told Reuters. He noted that the government had been assessing the potential second and third-order impacts had the conflict persisted, highlighting the hit to energy infrastructure as a key concern for the eventual return to normalcy in supply chains.
Aurangzeb also stated that Islamabad may increasingly tap commercial borrowing during FY27 as part of an effort to reshape its creditor mix without expanding the country's overall external debt burden. Pakistan is exploring a range of international debt instruments, including additional Panda bonds, Eurobonds, and U.S. dollar-denominated issuances, although the size of those offerings has yet to be determined.
The FY27 budget projects economic growth of 4% and inflation of 8.2%, with increased defence expenditure and reliance on stronger tax collection to keep the country's $7 billion International Monetary Fund programme on track.