Pakistan’s current account deficit is expected to remain between 0% and 1% of gross domestic product during the current fiscal year, with strong remittance inflows providing support to the country’s external position, Federal Finance Minister Muhammad Aurangzeb said at the 10th Annual Microfinance Conference organized by the Pakistan Microfinance Network. He said Pakistan’s broader macroeconomic position had continued to improve, with the country’s twin deficits declining to 2.6% of gross domestic product by the end of the last fiscal year in June, compared with a peak of 12.5%. Foreign exchange reserves have also reached a record $21.4 billion, providing approximately three months of import cover, which the minister described as a useful international benchmark.
Aurangzeb said the gains in macroeconomic stability had continued to consolidate during the first quarter of the current fiscal year. He pointed to three sovereign credit rating upgrades since April 2025 and Pakistan’s return to international capital markets after a gap of around four years as external indications of improving investor confidence in the country’s economic direction. Pakistan recently issued $3 billion in Eurobonds, with investor demand reaching twice the size of the amount offered. Investors from Europe, the United States, Asia and the Middle East participated in the transaction, with the largest share of demand coming from Europe and the United States. The minister presented the successful issuance as part of the broader improvement in Pakistan’s access to international financing.
The finance minister also discussed the continuing Gulf crisis and its possible impact on Pakistan’s economy, saying the situation was being monitored closely in coordination with State Bank of Pakistan Governor Jameel Ahmad. According to Aurangzeb, the immediate impact on procurement had been managed effectively, while the implications for inflation and economic growth remained manageable at present. The finance minister and the central bank governor had reviewed first-quarter economic indicators a day earlier and remained confident about the broad outlook for inflation, gross domestic product growth and the current account. Strong remittance inflows are expected to provide additional support and help keep the current account deficit within the projected 0% to 1% range.
Pakistan’s growth performance has also changed significantly from the contraction recorded several years ago. Aurangzeb said gross domestic product had contracted by 0.3% three years ago before expanding by 3.7% in the last fiscal year. Growth is now expected to exceed 4% during the current fiscal year. However, he stressed that macroeconomic stability needs to become a permanent feature of the economy so Pakistan can move away from its recurring boom-and-bust cycle. According to the minister, the next phase should focus on sustainable and responsible growth rather than liquidity-driven, consumption-led expansion that can create renewed balance of payments pressures. This approach places greater emphasis on strengthening the foundations of growth while maintaining external and fiscal stability.
The government will continue reforms covering taxation, energy, state-owned enterprises, privatization and public finance, Aurangzeb said. He referred to progress on the privatization agenda following the Pakistan International Airlines process, where two large local conglomerates demonstrated collective bidding interest of $1.2 billion. The government has also laid out plans for the privatization of power distribution companies, attracting foreign interest for the first time, including participation from three Turkish firms. Aurangzeb said private-sector-led growth would remain important, with public-private partnership structures expected to play a greater role. He also called for a change in Pakistan’s bilateral economic engagement with international partners, moving from an approach centered on aid toward greater emphasis on trade and investment.
The minister also highlighted technology-driven opportunities within Pakistan’s emerging economy, particularly artificial intelligence, Web 3.0 and blockchain. He said information technology freelancers generated $1.6 billion in IT export services during the last fiscal year. According to Aurangzeb, developing additional skills in blockchain coding could allow freelancers to move toward higher-value assignments, potentially increasing earnings from tasks worth around $50 to work valued at approximately $240. The emphasis on digital skills comes as Pakistan seeks to expand technology exports and create higher-value employment opportunities within its growing digital economy.
Access to finance was another major area addressed by the finance minister. Under the government’s affordable housing scheme, banks have approved more than Rs400 billion, while Rs76 billion has already been disbursed to first-time homebuyers. In agricultural finance, the Zarkhez Scheme has approved Rs6 billion and disbursed more than Rs2 billion during the past seven to eight months. The scheme provides small farmers with an end-to-end digital and collateral-free financing facility. Aurangzeb also said the export refinance limit had been increased from Rs1 trillion to Rs1.5 trillion, with 20% of the facility mandated for small and medium-sized enterprises in the supply chain at a subsidized rate of 4.5%.
Addressing microfinance institutions, Aurangzeb called for a broader shift in how lenders measure performance and assess borrowers. He asked institutions to focus their key performance indicators on incremental lending, particularly by measuring the number of new borrowers receiving financing in agriculture and small and medium-sized enterprises rather than relying primarily on repeat lending. He also urged microfinance providers to move beyond collateral-based lending and assess customers through cash-flow analysis and repayment capacity. Digital credit-scoring engines and alternative data can support this approach by helping lenders evaluate borrowers who may not have conventional collateral.
Aurangzeb further called on microfinance institutions to measure the economic outcomes generated by financing rather than focusing only on the volume of loans issued. These measures could include whether borrowers progress from small businesses to medium-sized and eventually corporate enterprises, as well as the number of jobs created and the growth of women-led entrepreneurship. The approach links financial inclusion with broader economic activity by emphasizing whether access to finance enables borrowers to expand their businesses and contribute to employment and investment. With the current account outlook supported by remittances, reserves at a record level and growth expected to move above 4%, the government is seeking to use the period of improved macroeconomic stability to strengthen lending, exports, technology skills and private-sector activity without returning to the imbalances that have previously triggered external financing pressures.
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