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Twin deficits threaten Pakistan's economic growth, says finance minister

Pakistan seeks to diversify capital market access, improve credit rating

Twin deficits threaten Pakistan's economic growth, says finance minister

Pakistan Finance Minister Muhammad Aurangzeb

GoP Finance Division / Facebook

Pakistan's Finance Minister Senator Muhammad Aurangzeb on Wednesday identified the country's twin deficits — current account and fiscal — as the primary obstacles to sustainable growth.

Speaking at a World Economic Forum panel discussion, he highlighted the low tax-to-GDP ratio (9-10%) was a major contributor to the fiscal deficit, outlining plans to increase it to 13% through structural reforms.

Aurangzeb emphasized that while borrowing can be beneficial, it must be strategically used to boost exports and productivity, not to fund expenses or subsidies. He noted that the country's debt-to-GDP ratio has improved significantly.

The minister acknowledged the disruptive impact of import dependency on economic stability, particularly as growth approaches 4%. He stressed the government's focus on export-driven growth, economic resilience, and consistent policies to address these challenges.

Recognizing the private sector's crucial role, Aurangzeb announced that the next phase of the China-Pakistan Economic Corridor (CPEC) will prioritize business-to-business partnerships, aiming to attract Chinese companies to establish production units in Pakistan and transform the country into a regional export hub.

The IT sector was identified as a significant area of potential growth, with the minister emphasizing the need to create more jobs within the country for skilled Pakistani youth.

He also highlighted the government's collaboration with the World Bank to address challenges like population growth, poverty, and climate change, and its efforts to diversify capital market access and improve its credit rating.

Aurangzeb concluded by reiterating the government's commitment to reshaping the economy through exports and structural reforms to ensure long-term stability.

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