FinMin meets global rating agencies' teams, IMF
Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, met with the Fitch Ratings team in Washington, DC, on the sidelines of the International Monetary Fund-World Bank Spring Meetings.
According to a press statement released on Friday, the finance minister expressed gratitude to Fitch Ratings for upgrading Pakistan's sovereign credit rating from CCC+ to B-, describing it as a reflection of the country's improving macroeconomic outlook and fiscal discipline. He explained that this positive revision would pave the way for Pakistan's return to international financial markets.
During the meeting, Aurangzeb also updated the Fitch team on the government's structural reform agenda, especially in the areas of energy, taxation, State-Owned Enterprises (SOEs), public finance, and debt management. The engagement included detailed responses to Fitch's inquiries regarding ongoing tariff reforms, tax administration improvements, and broader revenue mobilisation strategies.
On the same sidelines, the finance minister met with representatives from Moody's, where he reiterated the government's commitment to a structural reform agenda aimed at ensuring Pakistan is firmly set on the trajectory of long-term economic stability. He cited positive economic indicators including low inflation, current and primary account surpluses, exchange rate stability, and record-high remittance inflows as evidence of Pakistan's steady economic footing.
Aurangzeb highlighted a comprehensive tax reform initiative currently underway, aimed at expanding and deepening the tax base through improved processes, technology integration, and personnel development. Regarding tariff reforms, he expressed the government's readiness to engage constructively with the United States administration.
In another significant engagement, the finance minister met with Jihad Azour, Director for the Middle East and Central Asia at the International Monetary Fund (IMF). He reiterated Pakistan's commitment to stay the course on reforms and to build on the achievements of the past eighteen months.
As per the statement, Aurangzeb described the credit rating upgrade by Fitch as an external validation of the reform programme's success, and a critical boost to investor confidence in Pakistan's economic trajectory.
Speaking at the Vulnerable 20 (V20) Ministerial Dialogue on "Enabling Climate Prosperity," Aurangzeb also outlined Pakistan's Climate Financial Strategy. He said the country was working on a Climate Prosperity Plan and had reached a staff-level agreement with the IMF on a new RSF arrangement.
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Express Tribune
12 hours ago
- Express Tribune
Industrial zone on PSM land planned
The government on Wednesday decided to establish a new industrial estate on the land of the closed Pakistan Steel Mills (PSM) and also sanctioned the diversion of Rs2.9 billion in publicity funds for the upgradation of an English news channel operated by the Pakistan Television Corporation (PTV). The decisions were taken by the Economic Coordination Committee (ECC) of the Cabinet, which met under the chairmanship of Finance Minister Muhammad Aurangzeb. The ECC approved the establishment of the industrial estate on 3,200 acres of PSM land by changing its designated use from steel mills to industrial. The decision followed discussions with the Sindh government and deliberations in the apex committee of the Special Investment Facilitation Council (SIFC). The ECC also rescinded its two-and-a-half-year-old decision banning the lease of PSM land to any industry, organisation, group, or individual, a move aimed at facilitating the development of the new industrial estate over the 3,200 acres. The government is also attempting to revive the closed PSM with assistance from Russia. Last month, Special Assistant to the Prime Minister (SAPM) on Industries Haroon Akhtar Khan visited Russia and held talks on the mill's revival. According to Khan, the Russians expressed willingness to finance and conduct a feasibility study for the project. The matter of pricing PSM land remains open, although the SIFC has already instructed that instead of selling land for industrial purposes, the concerned entities should issue licenses, a step that would substantially reduce costs for setting up new factories. The ECC directed the Board of Investment (BOI) to develop clear criteria and terms and conditions for the allotment of land to industrial units and private developers for the establishment of the industrial estate within one month. The government maintains that the industrial estate should not be developed using taxpayers' money and that private developers should be engaged instead. PSM owns about 19,013 acres of land in Karachi. Of this, 6,409 acres are available for setting up an industrial estate. However, the Sindh government has stated that establishing such an estate would require a change in land use from steel mills to industrial. The Ministry of Industries informed the ECC that Pakistan's regional competitors are offering a wide range of incentives to attract investment in the manufacturing sector, extending far beyond the provision of land at subsidised rates. Furthermore, comparatively higher costs of energy, power, and taxes constitute major impediments that could be offset by granting land through licenses. The ministry also noted that the PSM has accrued liabilities of around Rs400 billion and that land remains the primary source to offset these. Since the current proposal does not involve transferring ownership of the land, the option to leverage it to offset PSM liabilities at an appropriate stage would remain intact, it added. The ECC also approved a supplementary grant of Rs2.9 billion for upgrading PTV World, the English news channel owned by the state-run PTV Corporation. The decision was influenced by the context of the India-Pakistan war. Both military and civilian authorities believe the country requires more English-language channels to convey the state's narrative to foreign audiences and the diplomatic corps in Pakistan. The Rs2.9 billion will be used to modernise PTV World's infrastructure, enhancing its capacity for high-quality national and international broadcasting, the ECC was informed. The Ministry of Information told the ECC that, through its special wartime transmissions, PTV World had made a vital contribution to safeguarding national and ideological interests, boosting public morale, and projecting the courage and professionalism of Pakistan's Armed Forces on the international stage. Based on this experience, the PTV Corporation emphasised the urgent need to upgrade and modernise PTV World's infrastructure to meet the demands of emerging broadcast technologies. However, due to severe financial constraints and limited internal resources, the corporation cannot undertake this initiative independently. The government has decided to divert Rs2.9 billion from the Rs5 billion allocated in the budget for government publicity and advertisement expenditure. The finance ministry also agreed to reallocate the funds from the publicity budget. The finance ministry stated that the ECC had sanctioned Rs2.9 billion for the upgradation of its English news channel to improve broadcast quality and expand outreach to global audiences. The ECC further urged the ministry to develop a comprehensive business plan to make the channel self-sufficient and financially sustainable, thereby reducing dependence on federal grants in the future. The ECC also approved the removal of the requirement for Health Quarantine Certificates on the import and export of leather, a step aimed at facilitating the leather industry and enhancing its competitiveness in international markets, according to a Ministry of Finance announcement after the meeting. The committee additionally approved a supplementary grant for the Ministry of Climate Change and Environmental Coordination for the current financial year 2025-26, enabling the ministry to strengthen initiatives for environmental protection and climate resilience through participation in the upcoming 30th Session of the Conference of Parties (COP-30) to be held in Brazil later this year.
Business Recorder
13 hours ago
- Business Recorder
Local, forex issuer and senior unsecured: Moody's upgrades debt ratings to ‘Caa1'
ISLAMABAD: Moody's Ratings (Moody's) on Wednesday upgraded the government of Pakistan's local and foreign currency issuer and senior unsecured debt ratings to Caa1 from Caa2. The rating agency also upgraded the rating for the senior unsecured MTN programme to (P)Caa1 from (P)Caa2 and concurrently, changed the outlook for the government of Pakistan to stable from positive. The upgrade to Caa1 reflects Pakistan's improving external position, supported by its progress in reform implementation under the IMF Extended Fund Facility (EFF) program. Foreign exchange reserves are likely to continue to improve, although Pakistan will remain dependent on timely financing from official partners, it added. Govt presents 'compelling evidence' of Pakistan's economic recovery to Moody's Moody's said the upgrade to Caa1 reflects Pakistan's improving external position, supported by its progress in reform implementation under the International Monetary Fund (IMF) Extended Fund Facility (EFF) programme. It said foreign exchange reserves are likely to continue to improve, although Pakistan will remain dependent on timely financing from official partners. The rating agency said that the sovereign's fiscal position is also strengthening from very weak levels, supported by an expanding tax base. Its debt affordability has improved, but remains one of the weakest among rated sovereigns. The Caa1 rating also incorporates the country's weak governance and high political uncertainty. In the report it is further stated that the stable outlook reflects balanced risks to Pakistan's credit profile. 'On the upside, improvements in the debt service burden and external profile could be more rapid than we currently expect. On the downside, there remains risks of delays in reform implementation required to secure timely official financing, which would in turn weaken Pakistan's external position again,' Moody's remarked. Moody's said the upgrade to Caa1 from Caa2 rating also applies to the backed foreign currency senior unsecured ratings for 'The Pakistan Global Sukuk Programme Co Ltd'. 'The associated payment obligations are, in our view, direct obligations of the Government of Pakistan. Concurrently, we changed the outlook for The Pakistan Global Sukuk Programme Co Ltd to stable from positive, mirroring the stable outlook on the Government of Pakistan', it added. Concurrent to this action, Moody's also raised Pakistan's local and foreign currency country ceilings to B2 and Caa1 from B3 and Caa2, respectively. The two-notch gap between the local currency ceiling and sovereign rating is driven by the government's relatively large footprint in the economy, weak institutions, and high political and external vulnerability risk. The two-notch gap between the foreign currency ceiling and the local currency ceiling reflects incomplete capital account convertibility and relatively weak policy effectiveness. It also takes into account risks of transfer and convertibility restrictions being imposed. Moody's further stated Pakistan's external position has continued to strengthen over the past year. 'We expect further gradual improvements as progress in reform implementation under the IMF program supports financing from bilateral and multilateral partners. In turn, this contributes to continued increases in the sovereign's foreign exchange reserves, albeit from still fragile levels,' Moody's added. Moody's said Pakistan fully met its external debt obligations and added to its foreign exchange reserves in fiscal year 2025 (ending June 2025). Reserves rose to $14.3 billion as of 25 July 2025, equivalent to about ten weeks of imports. This compares with $9.4 billion at the time of its last rating action in August 2024, and is about triple the level compared to end-June 2023. The agency stated that Pakistan successfully completed the first review of the IMF programme on schedule, unlocking a $1 billion disbursement from the IMF in May 2025. It also secured a $1 billion commercial loan in June 2025, with a $500 million policy-based guarantee by the Asian Development Bank (ADB). Moody's expect Pakistan to fully meet its external debt obligations for the next few years, contingent on steady progress on reform implementation and timely completion of IMF reviews. It stated the sovereign has unlocked new sources of financing with a 28-month arrangement under the IMF Resilience and Sustainability Facility (RSF) worth about $1.4 billion and a ten-year country partnership framework with the World Bank for fiscal year 2026-2035, with an indicative financing envelope of $20 billion. Moody's pointed out that Pakistan's external position remains fragile. Its foreign exchange reserves remain well below what is required to meet is external debt obligations, underscoring the importance of steady progress with the IMF programme to continually unlock financing. It estimates Pakistan's external financing needs are about $24-25 billion in fiscal year 2026, and similar amounts again in fiscal year 2027. Moody's said Pakistan's fiscal position has improved from very weak levels, reflecting progress in implementing revenue-raising measures. The budget deficits are narrowing and primary surpluses are widening. The government debt affordability is also improving, although it remains one of the weakest among our rated sovereigns. The government has strengthened its revenue collection through a combination of better enforcement and new tax measures. Government revenues rose to about 16 percent of GDP in fiscal year 2025 from 12.6 percent in fiscal year 2024, led by a large increase in tax revenues, amounting to about 2 percentage points of GDP. The government's non-tax revenues also rose sharply due to a one-off extraordinary dividend from the State Bank of Pakistan (SBP), the central bank. 'We expect the government to continue enhancing revenue administration and compliance, alongside the introduction of new tax measures. We estimate tax revenues to pick up by another 0.5 percentage points of GDP in fiscal year 2026. However, a decline in SBP dividends will lead to an overall narrowing of government revenue to about 15-15.5 percent of GDP,' it added. The rating agency stated that it expects the government expenditure to remain contained, even as budgeted defence spending has increased. The government has gradually cut subsidies to the power sector alongside progress with energy sector reforms. Debt servicing costs are also reduced due to declining domestic interest rates in tandem with lower policy rates. Overall, the fiscal deficit is expected to narrow further to 4.5-5percent of GDP in fiscal year 2026 (FY2025: 5.4 percent). At the same time, we expect government interest payments to absorb about 40-45percent of revenue in 2026-2027, which is a marked decline from about 60 percent in fiscal year 2024, but remains very high internationally and a key credit constraint, it added. On the upside, improvements in the debt service burden and external profile could be more significant than it currently expect. A building track-record of reforms, including revenue-raising measures, that effectively safeguard macroeconomic stability could unlock more financing. In turn, this would further strengthen foreign exchange reserves and the sovereign's external position. Pakistan's debt affordability may also improve more significantly than it currently forecast. This could come from the government implementing additional revenue measures that broaden the tax base more than it currently assume. On the downside, there remains risks of slippage in reform implementation or results, leading to delays in or withdrawing of financing support from official partners. This could in turn lead to renewed material deterioration in the sovereign's external position. A number of previous IMF programmes were not completed, in part reflecting weak governance and institutional strength, compounded by a challenging domestic political environment. Moody's said the ratings would likely be upgraded if Pakistan's debt affordability and external position improved significantly, beyond its current expectations. This would likely be linked to marked progress in reform implementation which would accelerate external financing from official and commercial sources. Continued fiscal consolidation, including through implementing revenue-raising measures, pointing to a meaningful improvement in debt affordability beyond our current expectations would also be credit positive. The rating agency said the ratings would likely be downgraded if there were evidence of a renewed material increase in government liquidity or external vulnerability risks. This could come from financing strains due to delays in or withdrawal of support from multilateral and bilateral partners, leading to a rapid and significant decline in the foreign exchange reserves. An increase in social and political risks that disrupted policymaking and undermined Pakistan's ability to secure financing would also be credit negative. Copyright Business Recorder, 2025
Business Recorder
13 hours ago
- Business Recorder
Team coming by Sept-end: $1bn 3rd IMF tranche anticipated: Aurangzeb
ISLAMABAD: Finance Minister Muhammad Aurangzeb said on Wednesday that an International Monetary Fund (IMF) delegation will visit Pakistan at the end of September, with the country expecting to receive the third tranche of $1 billion upon completion of the next review. This he stated during an informal talk with media on the occasion of 'Independence Day Celebrations,' organised by Rawalpindi Chamber of Commerce and Industry (RCCI) here on Wednesday. Preparations for the upcoming economic review were complete, he added. IMF projects Pakistan's GDP growth at 3.6% for FY26, below govt target of 4.2% Addressing the business community, Aurangzeb said that there was scope for further cut to policy rate during the ongoing calendar year, pointing to a decline in average and core inflation. 'At present, the policy rate is at 11 percent. I am always very careful that the policy rate and the market-based exchange rate are very much the purview of the central bank, the State Bank of Pakistan, and the Monetary Policy Committee,' Aurangzeb added. 'Having said that, my own view, and I am giving my personal view here, is that given the current inflation, whether it is the average inflation or the core inflation, I do think there is room to do more in terms of the policy rate, and I am very hopeful that during the course of this calendar year we will see movement in the policy rate,' he added. The finance minister said that national security and economic stability are interdependent. 'Over the past 18 months, significant steps have been taken to boost revenue, stabilise the rupee, and reduce the policy rate,' he said, adding agricultural loans have surpassed Rs2.5 trillion, debt servicing reached Rs1.0 trillion last year. The minister said the government had finalised economic growth-focused agreements with the IMF, reached a favourable tariff deal with the United States, and was working on key accords with China. Panda bonds would be issued by year-end, and a benchmark for Sukuk bonds had been set, the finance minister added. 'We are heading in the right direction,' said the minister, adding that the government was committed to providing a better environment for the business community and encouraging the private sector to lead the economy. 'Our economic and financial achievements are being recognised globally. There is hope for further improvement in the coming days.' The minister said company registrations had risen by 250,000, loans to the private sector were up 38 percent, and the government had paid one trillion rupees in debt servicing over the past year. He also pointed to reduced electricity tariffs, expected improvements in energy costs, and ongoing reforms in tax administration. He assured that taxation reforms would not burden the salaried class and that the prime minister was personally overseeing FBR's transformation. Monthly meetings with chambers would be held to address business concerns. The finance minister said that once fiscal discipline is achieved, the government's borrowing requirement will decrease, and bank and other economic institutions will reach out to the private sector. He added that the government had reduced its debt servicing by Rs1tr in the past year. 'God-willing, our debt servicing will go down by more than 1tr this year as well.' Aurangzeb said; 'We are getting our house in order, which is the federal government. And therefore, it is important that you also take whatever efforts you are making towards the private sector.' 'On the financing costs, we have moved in the right direction. On the energy side, we are beginning to move in the right direction. 'On the taxation side, the fiscal space we had and whatever we could do in this budget, I am very clear in terms of the direction of travel. We need to bring taxation to a regional competitive level,' he added, stressing that expanding the tax nets and closing the loopholes were necessary for that. Aurangzeb affirmed that the government, under Prime Minister Shehbaz Sharif's leadership, is prioritising a business-friendly environment. He said that consumer confidence is at its peak, economic growth is at record levels, and privatisation of state-owned enterprises will accelerate this year. Aurangzeb highlighted there had been a 'record increase' of 65,000 new investors who have come into the PSX over the last year. Company registrations' annual levels had also gone above 250,000, the minister said, terming both developments as a 'big structural change.' Talking about the structural reforms, the minister pointed out the ongoing tariff reforms, which he said were taking place for the first time in Pakistan's history. Aurangzeb also pledged further reduction in energy costs due to the savings from the revised agreements with 27 independent power producers earlier this year. He highlighted that the reforms aim to explore how to reduce the costs of raw materials and intermediate products so that Pakistan could become an export-led economy. Aurangzeb said the federal government had begun a right-sizing process for 45 ministries and departments, and the privatisation of state-owned enterprises would accelerate. Pointing out that international financial institutions had hailed Pakistan's economic reforms, and that Fitch and S&P Global Ratings had upgraded the country's credit ratings this year, he added. RCCI marked Pakistan's 78th Independence Day with a flag hoisting ceremony and 'Marka e Haq' celebrations. Federal Minister for Finance, Muhammad Aurangzeb, attended as the chief guest. The event also featured the cutting of an Independence Day cake. RCCI President Usman Shaukat lauded Pakistan's journey of resilience, sacrifice, and hope over the past 78 years. Highlighting recent improvements in economic indicators, he urged the government to further lower interest rates to single digits, reduce electricity and gas tariffs, and cut tax rates to stimulate business activity and job creation. Copyright Business Recorder, 2025
