Finance Minister Muhammad Aurangzeb on Saturday told AFP that Pakistan had so far withstood the shock from skyrocketing energy prices due to the US-Israeli war on Iran, but that attacks on infrastructure in Saudi Arabia and other Gulf countries were “worrying” for the country’s longer-term economic outlook.
In an interview on the sidelines of the International Monetary Fund (IMF)-World Bank Annual Meetings in Bangkok, Aurangzeb said the country had procured enough energy supplies to last through November, and was now planning for the winter months, when household needs typically spike.
“The first-order impact has been negotiated well by Pakistan,” he said.
“We’ve had no shortage, no queues at the gas stations, and no law and order situation, which at times we have seen in some of the countries.”
He added that unless the government saw “an absolute dire need”, it would not be procuring spot cargoes on the LNG front, which tend to be far more expensive than previously contracted shipments.
Since the US and Israel launched the war on Iran in February, global energy prices have surged as Tehran’s retaliatory action has targeted Washington’s Gulf allies and curtailed oil and gas supplies.
With Yemen’s civil war flaring back to life as well, the Houthis there have repeatedly attacked Saudi infrastructure, including energy facilities and airports, in recent days.
Aurangzeb expressed alarm at the escalation, saying damage to such sites would delay a return to economic normalcy.
“What is now [the] worrying part of it is when the energy infrastructure starts getting hit,” he said.
“I, to be very honest, I don’t know where that would go. But one thing is very clear: that if the infrastructure continues to get hit, the return to normalcy, even if things subside, will take longer.”
‘Pushback’
Pakistan has been a frequent customer at the IMF, the lender of last resort to countries on the brink of default.
It is currently in the midst of its 25th programme with the Fund — at least 11 of which have been outright bailouts — since gaining independence in 1947.
With global debt stocks running high, the IMF has called at this year’s annual meetings on all economies, even those most vulnerable to the Iran war shock, to engage in fiscal consolidation to avoid a potential crisis.
“Fortunately for us, we have been on this fiscal consolidation path for a while,” Aurangzeb said with a rueful smile.
The country’s tax revenues have grown significantly in recent years, and the finance minister said the government was targeting the theft of taxes by private sector businesses that collected sales tax from consumers but never deposited it in government accounts.
Such theft accounted for billions of dollars, Aurangzeb said, adding that there remained “room for improvement” on increasing income tax collection as well.
He said the government’s reform agenda had faced resistance from industry, lobbying groups and vested interests.
“Every reform, everything that you try to do when you try to change the status quo, there is pushback,” he said.
The minister is leading Pakistan’s delegation and is holding high-level engagements with international financial institutions, finance ministers, policymakers and investors.
Yesterday, he met World Bank Group President Ajay Banga at a dinner hosted by the Thai prime minister on the sidelines of the annual meetings, state-run Pakistan TV reported.
“The occasion provided an opportunity for informal interaction alongside the high-level engagements at the annual meetings”, it said.
Pakistan remains engaged with the IMF under a $7 billion Extended Fund Facility (EFF) and a $1.4bn Resilience and Sustainability Facility (RSF).
The two reached a staff-level agreement after a fourth review under the EFF and a third review under the RSF earlier this month, which qualified Pakistan to draw about $1.2bn from the Fund’s resources.