ISLAMABAD: Pakistan’s economic outlook 2027 could improve following the end of the conflict between the United States and Iran, but it is still too early to revise official budget projections, Finance Minister Muhammad Aurangzeb said.
Speaking to Reuters shortly after Washington and Tehran signed an agreement to end hostilities, Aurangzeb said the damage caused to energy infrastructure during the conflict would continue to affect supply chains and inflation in the near term.
He said the government had been closely monitoring the possible economic consequences if the conflict continued. While the ceasefire offers positive prospects for Pakistan’s economy, the country still faces challenges linked to disrupted energy networks and supply chains.
Aurangzeb said he sees potential upside in the government’s projections for the next fiscal year but stressed that revising the budget at this stage would be premature.
Pakistan’s FY2026-27 budget, presented in parliament last week, targets economic growth of 4 percent and inflation of 8.2 percent. The budget also increases defence spending by 18 percent to Rs3 trillion while relying on higher tax collection to keep the country’s $7 billion IMF programme on track.
The finance minister also outlined plans to reshape Pakistan’s external debt profile. He said the government may use commercial borrowing in fiscal year 2027 to replace some bilateral financing without increasing the overall level of external debt.
According to Aurangzeb, the objective is to diversify financing sources rather than expand the country’s debt burden. Pakistan recently repaid $3.4 billion in bilateral deposits to the United Arab Emirates and has also secured financing from UAE commercial banks.
He said the government plans to pursue additional financing through Panda Bonds, Eurobonds, US dollar-denominated bonds and its first rupee-linked, dollar-settled bond issuances. Final decisions on the size of these offerings have yet to be made.
The FY2026-27 budget projects $2.82 billion in commercial and Eurobond financing. Pakistan has already secured approval for up to $1 billion in Panda Bonds after its debut issuance of $250 million, which received significant backing from international development institutions.
Aurangzeb, a former banker, has now presented three consecutive federal budgets, a notable achievement in Pakistan’s political environment where finance ministers often change before completing multiple budget cycles.
He also addressed growing interest in Pakistan’s defence manufacturing sector following last year’s military conflict with India. While international attention toward Pakistan’s defence products has increased, he said it remains too early to estimate any potential gains from defence exports.
The minister noted that the government’s immediate priority remains meeting defence requirements as Pakistan continues to manage security concerns along its borders with Afghanistan and India.
On the digital economy, Aurangzeb said Pakistan will focus on establishing a regulatory framework for cryptocurrencies, tokenisation and digital asset exchanges before introducing taxation measures.
He said taxation of the sector would eventually become necessary, but the government’s current priority is to formalise and regulate the industry first. Once a proper framework is in place, revenue generation opportunities can be explored more effectively.