Pakistan can improve 2027 economic projections after Iran war end: Aurangzeb

ISLAMABAD: Pakistan’s Finance Minister Muhammad Aurangzeb hoped improvement in economic projections for FY2027 following the end of the Iran war, but saying it is too early to revise the budget presented just days ago.

In an interview to Reuters, he said damaged energy infrastructure meant supply chains would take time to return to normal, after the conflict pushed inflation back into double digits.

“We were looking at how we manage the second, third-order impact in case this conflict continues,” he said. “The energy infrastructure has been hit. And therefore, it will take time before we return to normalcy in terms of supply chains.”

He added, “I do see upsides in what we have projected for next year,” but cautioned it would be “way too premature” to revise the budget.

Pakistan’s FY27 budget, presented in parliament on Friday, targets growth of 4% and inflation of 8.2%.

It raised defence spending 18% to 3 trillion Pakistani rupees ($10.8 billion), while relying on higher tax revenue to keep a $7-billion IMF programme on track.

Islamabad may use commercial borrowing in fiscal year 2027 to change its creditor profile without increasing overall external debt, Aurangzeb added in comments on Monday.

“Ideally what we want to do is to see if we can replace some of the bilateral through commercial,” he said. “We do not intend to increase the size of our external debt.”

Pakistan repaid $3.4 billion in bilateral UAE deposits last month but has also tapped the emirates’ commercial banks for financing, reflecting the creditor-profile shift Aurangzeb wants to formalise.

It plans further Panda Bond, Eurobond, U.S. dollar and first rupee-linked, dollar-settled issues, though the sizes have yet to be decided, he said.

Interest has surged in Pakistan’s burgeoning defence industry after last year’s conflict with India, but Aurangzeb said it was too early to project any defence-export upside.

Pakistan’s defence manufacturing industry is running red-hot since its jets, drones and missiles earned the coveted ‘combat tested’ tag in the India conflict, drawing a slew of buyers.

Pakistan has moved to formalise the digital asset sector this year, for example by signing pacts with Binance and World Liberty Financial.

Aurangzeb said Pakistan would regulate crypto, tokenisation and digital-asset exchanges before taxing the sector, saying revenue gains would follow once it was formalised.