Pakistan could outperform its own economic forecasts for fiscal year 2027 following the end of the Iran conflict, although it is still too early to revise the country’s newly announced budget, Finance Minister Muhammad Aurangzeb has said.
In remarks to Reuters after the United States and Iran reached an agreement to end the fighting, Aurangzeb said the government had been preparing for the wider consequences of a prolonged conflict. While the ceasefire has eased some immediate concerns, the impact of damaged energy infrastructure across the region could continue to affect supply chains and keep inflationary pressures elevated for some time.
The finance minister acknowledged that Pakistan’s economic outlook may improve if regional stability holds, saying there could be upside to the government’s projections for the coming fiscal year. However, he cautioned against making any early changes to the budget presented in parliament last week.
The FY27 budget targets economic growth of 4 percent and inflation of 8.2 percent. It also includes an 18 percent increase in defence spending, taking the allocation to Rs3 trillion, while placing strong emphasis on raising tax revenues to keep Pakistan’s $7 billion IMF programme on track.
Aurangzeb also outlined plans to gradually reshape Pakistan’s external borrowing profile. Rather than increasing the country’s overall debt burden, the government is considering replacing part of its bilateral borrowing with commercial financing. Pakistan recently repaid $3.4 billion in bilateral deposits to the UAE while also securing funds from commercial banks in the Gulf nation.
As part of its financing strategy, Islamabad is exploring future issuances of Panda bonds, Eurobonds, US dollar-denominated debt instruments and a proposed rupee-linked, dollar-settled bond. The FY27 budget estimates include $2.82 billion in commercial and Eurobond financing.
On emerging sectors, the finance minister said Pakistan intends to regulate cryptocurrency and other digital assets before introducing taxation measures. He noted that bringing exchanges and tokenised assets into a formal regulatory framework remains the government’s immediate priority, with tax measures likely to follow at a later stage.
The comments reflect a government seeking to navigate global uncertainty while positioning the economy for stronger growth, maintaining fiscal discipline and opening the door to new areas of investment.
