Pakistan showcases fiscal turnaround, reform agenda at Saudi-hosted forum

KARACHI (Web Desk) - Finance Minister Muhammad Aurangzeb on Monday highlighted Pakistan’s recent fiscal progress, ongoing reforms and strategy to build buffers while sustaining growth at the AlUla Conference for Emerging Market Economies, underscoring the importance of institutional strengthening in navigating economic and climate-related shocks.

The second edition of the annual AlUla conference was launched by the Saudi Arabia’s Ministry of Finance and the International Monetary Fund (IMF) on Sunday. The conference brings together economic decision-makers, finance ministers, central bank governors, leaders of international financial institutions and a select group of experts and specialists from around the world.

Attending a high-level panel discussion “Fiscal Policy in a Shock Prone World” on the 2nd day of the AlUla Conference, Aurangzeb shared Pakistan’s experience in managing structural constraints, strengthening revenue mobilization, reducing debt vulnerabilities, and responding to shocks while protecting priority development spending.

“Pakistan’s fiscal strategy has been shaped by a history of boom-and-bust cycles, persistent structural deficits, high debt levels, and limited fiscal space,” he said, stressing that it has been critical to carefully safeguard the fiscal progress achieved over the past two to three years.

“Pakistan has delivered successive primary surpluses and reduced its fiscal deficit from around 8 percent of GDP (gross domestic product) to approximately 5.4 percent, with the current trajectory pointing toward a further reduction below five percent.”

Aurangzeb stressed the discussion around fiscal buffers is not academic for Pakistan but rooted in lived experience as a climate-vulnerable country.

Recalling the catastrophic floods of 2022, he noted that Pakistan was forced to make an immediate international appeal even for rescue and relief operations. In contrast, he said, the country was able to mobilize its own resources despite limited fiscal space during the large-scale floods affecting multiple provinces and river systems this year, demonstrating the practical value of rebuilding fiscal buffers to absorb exogenous shocks.

On the revenue side, he outlined sustained efforts to expand the tax base and strengthen compliance.

“Pakistan’s tax-to-GDP ratio has risen from below 10 percent to close to 12 percent,” the minister said, highlighting the transformation of the tax authority through reforms in people, processes and technology, including the use of AI-led production monitoring systems across various sectors to improve enforcement, curb leakages and reduce corruption by minimizing human intervention.

“The tax policy function has been separated from tax collection and placed within the Ministry of Finance to ensure that budgetary decisions are guided by economic value and policy considerations rather than purely arithmetic targets, while maintaining overall fiscal discipline.”

About expenditure management, the finance minister noted that Pakistan’s federal structure adds complexity, requiring close coordination between the federation and provinces.

“Pakistan’s debt-to-GDP ratio, which had reached around 74 percent, has been reduced to approximately 70 percent,” he said, underscoring ongoing domestic liability management operations aimed at lowering debt servicing costs, which remain the single largest expenditure item in the budget.

“Continued fiscal discipline would further ease debt pressures and help create additional fiscal space.”