Pakistan's finance minister said on Saturday that the country had so far absorbed the pressure of elevated energy costs stemming from the conflict involving Iran, while voicing concern about the economy's longer-term trajectory should strikes against infrastructure across Saudi Arabia and other Gulf states continue.
Speaking on the margins of the IMF-World Bank Annual Meetings in Bangkok, Finance Minister Muhammad Aurangzeb told reporters that energy stocks had been secured through to the end of November, with planning under way for the winter period, when residential demand tends to rise. He described the initial phase of supply management as having proceeded without disruption, pointing to the absence of fuel shortages, queues at petrol stations, or public order incidents — situations that had arisen elsewhere. Aurangzeb indicated that spot LNG purchases, which carry a considerably higher price tag than contracted volumes, would only be considered if the government judged the need to be pressing.
Hostilities between the United States and Israel on one side and Iran on the other, which broke out in February, have been accompanied by a rise in global energy prices, with Iranian military activity directed at Gulf states linked to Washington contributing to constraints on oil and gas output. Attacks on Saudi energy facilities and airports — carried out using drones and missiles — have persisted over recent days as fighting in Yemen's protracted conflict has intensified.
Aurangzeb voiced concern over the intensifying conflict, noting that strikes on energy infrastructure posed a threat to any near-term economic recovery, and acknowledged that the trajectory of such attacks remained unclear to him.
One analyst noted that infrastructure setbacks extending beyond any ceasefire stand to push a recovery timetable well into the future, also pointing out that Pakistan has approached the International Monetary Fund on several occasions when its public finances have drawn close to insolvency. The country's engagement with the Fund has now reached its 25th arrangement — a tally that includes no fewer than 11 programmes widely categorised as full financial rescues — spanning the decades since independence in 1947.
The current arrangement, valued at roughly $7 billion across a three-year span, saw the Fund approve a $1.2 billion disbursement tranche during the current month. At its annual meetings this year, the Fund has pressed all economies — including those absorbing the fallout from the Iran conflict — toward tighter fiscal management to head off a potential crisis. Aurangzeb noted that Pakistan had already been moving in that direction for some time.
Tax receipts have expanded over recent years, and the finance minister outlined plans to pursue businesses in the private sector that retain sales tax collected at the point of sale rather than remitting those funds to government coffers. Aurangzeb noted that losses from such practices ran into the billions of dollars, and identified income tax collection as an area where further progress could still be made.
He noted that the government's reform programme had drawn opposition from industry bodies, lobbying organisations, and those with an interest in preserving existing arrangements, adding that attempts to alter the status quo invariably attract pushback from affected parties.
Privatisation of state-owned enterprises sits at the heart of the loan conditions the IMF attaches to its financing arrangements with Pakistan — a country whose armed forces hold a portfolio of commercial operations stretching across sectors from real estate to farm inputs. When asked about those enterprises, Aurangzeb stated that none of them draw on state funds, noting that military-run commercial operations function independently and generate their own returns. "We are not providing any funds from the exchequer," he said.
The armed forces have held direct control of the country for close to two-fifths of its existence, and under current army chief Field Marshal Asim Munir that institutional influence over key centres of power has grown, even with a civilian administration formally at the helm.
