Aurangzeb pins hope on remittances, lower interest rate for economic easing

Remittances from overseas Pakistanis are expected to reach $41 billion in the current fiscal while a lower interest rate would trim interest rate payments on domestic debt, Finance Minister Muhammad Aurangzeb said on Wednesday.

He made these remarks during his address at the Pakistan Policy Dialogue, where the minister outlined ongoing economic reforms and financial stability achieved due to improved macroeconomic indicators.

The minister said remittances are projected to exceed the previous year’s collection of $38 billion last year, reflecting improved macroeconomic conditions and growing confidence among overseas Pakistanis.

Aurangzeb said the government also saved PKR 850 billion in interest payments during the previous fiscal year and expects similar savings this year, as lower interest rates ease pressure on debt servicing — the single largest component of government expenditure.

In December, the State Bank of Pakistan cut the policy rate by 50 basis points (bps) to 10.5% —the lowest level since March 2022 — due to steady inflation and economic growth.

Aurangzeb highlighted the government’s effort to manage debt, calling interest repayments “the biggest challenge”.

“Debt servicing remains our biggest challenge, which is why we have established a Debt Management Office to actively manage liabilities,” Aurangzeb said, adding that sustained monetary easing would reduce the need for aggressive debt operations.

The finance minister stated that structural reforms were ongoing across key sectors, including a major overhaul of the Federal Board of Revenue (FBR).

He said tax policy has been shifted to the Ministry of Finance, while the FBR’s mandate is now limited to revenue collection, with compliance and enforcement as core tools.

On fiscal policy, Aurangzeb cautioned against repeatedly raising import duties, calling the approach harmful for economic growth. “We need to rationalize duties and reduce the cost of doing business,” he said, citing high taxes and electricity tariffs as persistent obstacles for investors.

The finance minister also announced plans to issue Panda Bonds in China within the next two weeks to diversify funding sources.

Privatization success

The minister also highlighted the progress made on privatization, noting that local investors participated in the sale process of Pakistan International Airlines, while 24 state-owned entities have been transferred to the Privatization Commission.

Aurangzeb stated that inefficiencies in state-owned enterprises were costing the economy approximately PKR 1 trillion annually, prompting the government to shut down or restructure entities such as the Utility Stores Corporation, the Pakistan Public Works Department, and the Pakistan Agricultural Storage and Services Corporation, where subsidies were being misused.

Investor confidence

A survey presented at the dialogue showed 73% of investors now favor investing in Pakistan, up from 61% previously, he said.

An independent economist said the combination of higher remittances and lower interest costs has provided Pakistan with short-term breathing space but warned that risks remain.

“Remittances above $41 billion and savings of PKR 850 billion on interest payments significantly ease external and fiscal pressures,” said a macroeconomic analyst.

“However, these gains will only be sustainable if structural reforms — especially in taxation, energy pricing and state-owned enterprises — continue without delay.”

He added that while improving sentiment is encouraging, Pakistan remains vulnerable to external shocks and must convert temporary relief into long-term stability.