
Pakistani finance chief calls for coalition of developing nations to push for fair trade, financial reform
ISLAMABAD: Federal Minister for Finance and Revenue Muhammad Aurangzeb has proposed the formation of a global coalition of developing nations to collectively advocate for fair trade and better representation in international financial institutions, while criticizing the global economy as unequal, according to an official statement issued on Wednesday.
The finance chief made these remarks during his address at the Boao Forum for Asia Annual Conference 2025, held in China.
The forum, often referred to as the 'Asian Davos,' is a high-level platform where leaders from government, business and academia across Asia and other continents gather to discuss pressing global and regional issues, with this year's conference — titled 'Asia in the Changing World: Towards a Shared Future' — running from March 25 to 28.
'Developing countries must unite to demand fair trade principles and improved representation in global financial institutions,' Aurangzeb said, according to a finance ministry statement, as they asked them to form a global coalition.
He said globalization's had led to general progress, but its benefits remained unevenly distributed.
'The global economy has undoubtedly driven economic growth,' Aurangzeb said, according to a statement released by Pakistan's finance ministry. 'However, it remains highly unequal and fragmented.'
'Such an economy primarily benefits developed nations, while countries in the Global South are often overlooked,' he added.
Highlighting the structural challenges faced by developing nations, Aurangzeb pointed to high tariffs, discriminatory trade practices and barriers to market access that limit their ability to participate fully in the global economy.
He also stressed the urgency of reforming the global sovereign debt system, urging multilateral institutions such as the G20 and the IMF to play a more constructive role in debt relief and financial justice.
'The G20 and IMF must reform the sovereign debt system to enable debt forgiveness and ensure financial fairness,' he said.
Calling for inclusive and sustainable growth, Aurangzeb advocated for stronger multilateral cooperation to promote equitable market access, enhance regional connectivity, and build a global economy that works for all.
'An inclusive global economy is not a choice but a necessity,' he said.
He also underscored the role of technology in closing the global equity gap, recommending the creation of international AI and fintech funds to support digital inclusion in developing countries.
'Technology should serve as a tool for equity,' he said.
The finance minister further called for sustainability and environmental justice to be integrated into globalization policies.
He stressed the need for increased climate financing and easier technology transfer to countries most vulnerable to the effects of climate change.
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Arab News
14 hours ago
- Arab News
Pakistan unveils five-year tariff reform plan, warns of additional taxes if compliance measures blocked
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Arab News
14 hours ago
- Arab News
Pakistan's plan to sharply increase growth faces headwinds — analysts
ISLAMABAD: Pakistan is aiming to sharply increase economic growth under its annual federal budget unveiled on Tuesday, but analysts are skeptical about the country's ability to meet its ambitious goals. The budget targets higher revenues and a steep fiscal deficit cut under International Monetary Fund (IMF) backed reforms. Yet, defense spending was hiked 20 percent, excluding military pensions, after last month's conflict with India. Finance Minister Muhammad Aurangzeb said in a post-budget press conference on Wednesday that customs duties have been cut or removed on thousands of raw materials and intermediate goods. 'Industry here has to be competitive, competitive enough to export,' he said. But growth drivers remain unclear. The government is targeting 4.2 percent GDP growth in fiscal 2026, up from 2.7 percent this year, which was revised down from an initial 3.6 percent as agriculture and large-scale manufacturing underperformed. 'Pakistan's GDP growth projection of 4.2 percent appears ambitious given recent performance, and overly optimistic assumptions may place tax targets out of reach,' said Callee Davis, senior economist at Oxford Economics. Pakistan's past growth spurts were consumption-led, triggering balance-of-payments crises and IMF bailouts. The government says it now wants higher-quality, investment-driven growth. Aurangzeb said structural reforms are underway, pointing to East Asia-style pro-market transitions. 'This is an East Asia moment for Pakistan,' he said. 'BUDGET KEEPS IMF HAPPY' The 17.57 trillion rupee ($62.24 billion) budget comes as Pakistan remains under a $7 billion IMF program. Revenues are projected to rise over 14 percent, driven by new taxes and broadening the tax base. The fiscal deficit is targeted at 3.9 percent of GDP, down from this year's 5.9 percent. Key reforms include taxing agriculture, real estate, and retail, and reviving stalled privatizations. But revenue shortfalls this year have raised doubts, with both agriculture income tax and retail collections missing targets. Only 1.3 percent of the population paid income tax in 2024, government data shows. 'Pakistan's budget keeps the IMF and investors happy, even if it comes at a near-term cost to growth,' said Hasnain Malik, head of equity strategy at Tellimer. 'The political setup, with the military firmly in charge, also lowers the risk of protests.' While overall spending will fall 7 percent, defense will rise after the worst fighting between the nuclear-armed neighbors in decades. Including pensions, defense spending will total $12 billion, 19 percent of the federal budget or 2.5 percent of GDP, matching India's share, per World Bank data. The hike was enabled by a sharp drop in interest payments, as the central bank cut policy rates from 22 percent to 11 percent over the past year, easing domestic debt servicing costs. Aurangzeb said cuts in subsidies also helped create fiscal space. ($1 = 282.3000 Pakistani rupees)


Arab News
16 hours ago
- Arab News
FY26 budget: Markets rally, analysts welcome fiscal plan, business chambers voice mixed views
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'The government tried to ensure that the reforms being undertaken currently are on track and Pakistan continues with the fiscal consolidation phase.' Tawfik was pointing to several key ongoing fiscal and structural reforms that align with Pakistan's commitments under the IMF program and broader efforts to stabilize the economy. These include fiscal consolidation through broadening the tax base, rationalizing subsidies, and phasing out tax exemptions; revenue mobilization though increased taxation on interest income, a phased reduction in the super tax and the removal of certain tax exemptions to improve revenue collection; and debt rationalization by managing debt servicing costs, likely by shifting to more concessional financing and restructuring high-cost debt. While presenting the budget, the government also maintained it would continue its focus on providing relief to the salaried class and try to strike a balance between austerity with social protections. Tawfik agreed that the government had attempted to strike such a balance between providing relief and raising revenue, citing relief measures for the salaried class in the budget and the phased reduction in super tax. 'The government tried to make sure that we continue with the reforms that we have undertaken in the recent past, while ensuring that we meet the targets set for the upcoming fiscal year,' Tawfik said. UNREALISTIC GROWTH TARGET? However, Tawfik was skeptical of the government's 4.2 percent GDP growth target, calling it 'unrealistic' in the current economic context. 'Agriculture has been underperforming, and industries have not been performing due to the high cost of doing business. While we have seen interest rates coming down, agriculture would be the key sector to look forward to,' she said. Arif Habib Ltd. has forecast GDP growth of around 3.6 percent for FY26, below the government's target. Tawfik also noted that while the government had projected inflation at 7.5 percent, her team expected it to be slightly lower, around 6 percent to 6.5 percent, although risks remained from global commodity prices, exchange rate pressures and the fading base effect. She also flagged a projected current account deficit for FY26, in contrast to a surplus of $1.5 billion expected this fiscal year, citing pent-up demand and increased imports. Muhammad Waqas Ghani, head of research at JS Global Capital Ltd., echoed the sentiment that the budget was more 'measured' compared to previous years. 'In the last two years, we've seen very strict budgets. This time, the government has been a little lenient. We've seen reform measures but also some relaxations,' Ghani said. He pointed to tax relief for the salaried class and incentives for the construction sector, though he noted that the Public Sector Development Programme (PSDP) allocation had decreased. 'There are many allied industries that benefit when we see measures taken for construction,' he said, while noting a less favorable outcome for the auto sector. Ghani acknowledged the government's target of a 2.4 percent primary surplus as 'optimistic,' but achievable, and described the overall budget as 'laying the groundwork' for sustained economic growth. On the 4.2 percent GDP target, he noted: 'It's an optimistic target… but with interest rates coming down, we hopefully will see contribution from [agriculture and industrial] segments, and we can get closer to the target.' STRONG SUPPORT FROM EQUITY MARKETS While the budget drew applause for investor-friendly policies and efforts toward macroeconomic stability, analysts cautioned that delivery on ambitious fiscal and growth targets remained key to sustaining momentum. The stock market, however, responded positively from the opening bell. 'As soon as the market started today [Wednesday], it rallied close to 1,400 points,' Ghani said. 'We are in an IMF program and we're seeing a decent budget this time. All of these things point to the fact that the market is going to reach new heights in the coming months.' Indeed, despite macroeconomic challenges, the budget drew strong support from equity markets. A post shared by Arab News Pakistan (@arabnewspk) 'Measures we have seen so far are broadly positive for the stock market,' said Tawfik. 'The government kept capital gains tax and dividend income tax unchanged, which the market had feared would be increased.' Sector-specific measures were seen as favorable for cement, steel, and textile sectors, particularly with subsidies for low-cost housing and removal of sales tax exemptions for certain regions, which levels the playing field for local manufacturers. 'Intraday today, market has gone north of 124,000 points, and we have seen an intraday surge of 2,000 points,' Tawfik said. DIVIDED BUSINESS COMMUNITY The reaction from Pakistan's business chambers, however, was more mixed. Both the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), and the Karachi Chamber of Commerce and Industry (KCCI), warned that unless structural reforms were implemented and energy costs reduced, the budget may not succeed in spurring industrialization or export growth. The FPCCI welcomed certain relief measures, particularly for the salaried class and property sector, but flagged concerns about revenue expectations. 'We welcome steps to end harassment of taxpayers,' said Atif Ikram Sheikh, President FPCCI, noting the simplified tax return form as a positive step. However, he added: 'The increase in tax collection target by Rs2,500 billion ($8.8 billion) is unrealistic.' The FPCCI also expressed disappointment over the absence of support packages for key sectors such as IT, minerals, fishing, and e-commerce. The KCCI, by contrast, issued a harsh critique of the budget, calling it disconnected from ground realities. 'This is a camouflage budget,' said Zubair Motiwala, Chairman of the Businessmen Group (BMG) at KCCI. 'There is no meaningful relief for the business community or the common man. Instead of reforms to expand the tax base, the government is squeezing existing taxpayers.' KCCI President Muhammad Jawed Bilwani added: 'Electricity bills are unaffordable, interest rates are high, and there's no relief for the industrial sector. Without addressing the cost of doing business, you cannot expect growth or job creation.'