Pakistan FY27 growth to top 4% as privatization push targets USD 1 billion

Pakistan expects its economy to grow by more than 4% in the current fiscal year despite elevated oil prices, while the government aims to raise more than USD 1 billion through the privatisation of five or six state-owned entities, Finance Minister Muhammad Aurangzeb told Reuters on Monday.

Pakistan has so far secured adequate fuel supplies and avoided shortages, while key sectors including agriculture have remained resilient, Aurangzeb said in an interview on the sidelines of the International Monetary Fund and World Bank annual meetings in Bangkok. The government is, however, closely monitoring inflation risks from higher commodity prices.

What is Pakistan’s growth outlook for FY27?

Pakistan’s economy is expected to grow by more than 4% in FY27, according to Aurangzeb, who said adequate fuel procurement and resilience in agriculture were supporting the outlook. The government is nevertheless monitoring inflation closely because elevated oil and other commodity prices could increase price pressures.

“So I'm still quite clear that we should clock north of 4%,” Aurangzeb said.

Pakistan remains vulnerable to a prolonged Middle East conflict because of its dependence on Gulf energy imports, remittances and financing support from the region. It also relies on external financing to strengthen foreign exchange reserves and meet debt repayments.

US financing talks continue

Pakistan is continuing discussions with the United States over a proposed USD 10 billion exchange stabilisation facility that could provide additional financial support, Aurangzeb said.

He did not give a timeline for the conclusion of the negotiations.

“If it comes through, this will be a great help for us,” he said.

Aurangzeb said the absence of an agreement would not undermine Pakistan’s access to international markets.

“If it doesn't come through, this does not, you know, create any problem for us in terms of access to market,” he added.

The proposed facility is separate from ongoing discussions with the Export-Import Bank of the United States and the US International Development Finance Corporation.

Pakistan reached a staff-level agreement with the IMF last week that could unlock about USD 1.21 billion in financing under the lender’s Extended Fund Facility and climate-focused Resilience and Sustainability Facility, subject to IMF Executive Board approval.

The agreement forms part of Pakistan’s efforts to maintain macroeconomic stability under a USD 7 billion, 37-month IMF program signed in 2024, which includes fiscal reforms and measures to increase tax revenue.

Privatisation drive targets five or six entities

Aurangzeb said the government had around a dozen entities in its privatisation pipeline, including state-owned power distribution companies and plans to outsource airport operations.

“I expect about five or six of these to go through during this fiscal year,” he said, adding that the transactions could raise more than USD 1 billion.

Following the privatisation of Pakistan International Airlines last year, the government is seeking to advance the sale or restructuring of other state assets.

Privatisation is also a key part of Pakistan’s reform program with the IMF, with losses at state-owned enterprises putting pressure on public finances.

“We are quite clear that we want the private sector to lead the country,” Aurangzeb said. “So our role is to help support, assist any way we can in terms of the ecosystem.”

Middle East conflict poses economic risks

The continuing conflict involving the United States, Israel and Iran has increased risks for Pakistan through higher energy prices and broader inflationary pressures.

Pakistan is particularly exposed to disruptions in global energy markets because of its reliance on imported oil and gas. Aurangzeb said the government was monitoring commodity prices closely even as adequate fuel procurement and resilience in agriculture supported its growth outlook.

Pakistan has recovered some ground following a period of severe economic turmoil, supported by the IMF program and measures aimed at stabilising the economy.

However, sustaining growth while managing inflation, external financing requirements and fiscal pressures remains a challenge as geopolitical risks continue to weigh on the outlook.