Pakistan’s Finance Minister Mohammad Aurangzeb Plans to Boost Economy with Foreign Investments and IMF Agreement

Pakistan’s Finance Minister Mohammad Aurangzeb announced that the country will focus on meeting its external financing needs by speaking with foreign governments and lenders to draw foreign investment and seek loan rollovers. The Pakistani government is preparing to execute its new $7 billion International Monetary Fund (IMF) agreement.

Earlier this month, Pakistan and the IMF reached an agreement for a 37-month loan program. However, measures taken by Pakistani authorities, including raising taxes on agricultural incomes and lifting electricity prices, have raised concerns about the impact on poor and middle-class people facing rising inflation and higher taxes.

The economically challenged country has relied heavily on IMF programs for years, sometimes nearing the brink of sovereign default and turning to countries like the United Arab Emirates (UAE) and Saudi Arabia for financing to meet IMF targets. Aurangzeb mentioned that external financing remains crucial, but the government aims to focus on more sustainable forms such as direct investment and climate financing.

He stated, “I think in the existing situation we can expect those (loan) rollovers to continue to take place…we have requested extensions of maturities.” The IMF has noted that the new Extended Fund Facility program requires approval from its executive board and timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.

Aurangzeb emphasized that the external financing gap is “very manageable and very doable.” Pakistan plans to expand its strategy beyond relying heavily on rollovers and towards foreign direct investment, including in the large copper and gold Reko Diq mine in southern Pakistan. The government is identifying “bankable and investable” projects for Saudi Arabia and the UAE, which have shown interest in investing billions of dollars in the country.

“That is what’s going to lead to sustainability,” he said. “If we can’t get this executed in the next three years, we will not be able to get out of the ‘last’ program.” Pakistan has experienced economic boom-and-bust cycles for decades, leading to over 20 IMF bailouts since 1958. Currently, it is the IMF’s fifth-largest debtor, owing $6.28 billion as of July 11.

Additionally, Pakistan, one of the countries worst affected by climate change, has agreed with the IMF to start talks this year on financing under the Fund’s Resilience and Sustainability Trust (RST) for climate-related projects. In 2022, massive floods caused billions of dollars in damage to infrastructure and agriculture, and claimed hundreds of lives.

Aurangzeb said, “We will start the discussions around that during this calendar year, possibly at the time of the first review, which will be in October, around the annual meetings in Washington,” though he did not specify the amount the government would request.