Muhammad Aurangzeb expects Pakistan’s current account deficit at 0%-1% this year

October 07, 2026 (MLN): Pakistan's twin deficits have fallen to 2.6% of GDP at the end of the last fiscal year (June) from a peak of 12.5%. Foreign exchange reserves have reached a record $21.4bn, Federal Finance Minister Muhammad Aurangzeb said at the 10th Annual Microfinance Conference, organized by the Pakistan Microfinance Network.

The reserves, which hit the high a couple of weeks ago, provide roughly three months of import cover, a good international benchmark.

The minister said macroeconomic gains continued to consolidate during the first quarter of the current fiscal year. He pointed to two external validations of the direction of the economy: three sovereign rating upgrades since April 2025, and a return to international capital markets after a gap of about four years.

Pakistan issued $3bn in Eurobonds, with demand twice the size of the issue from investors in Europe, the US, Asia and the Middle East, the bulk of them from Europe and the US.

On the outlook, he said the lingering Gulf crisis is being monitored closely together with the State Bank of Pakistan Governor. The first-order impact has been managed well in terms of procurement, and the effect on inflation and growth is manageable for now.

The two reviewed first-quarter figures a day earlier and remain sanguine on inflation, GDP growth and the current account deficit for the full year. Strong remittance inflows should keep the current account deficit between 0% and 1%.

Muhammad Aurangzeb said macro stability is basic hygiene that must be made permanent to exit the boom-and-bust cycle. The focus must now shift from stabilization to growth, but it has to be responsible and sustainable rather than liquidity-pumped, consumption-led growth that triggers balance of payment crises. Growth has moved from a contraction of 0.3% three years ago to 3.7% last year, and is expected to exceed 4% this year.

He said reforms in taxation, energy, state-owned enterprises, privatization and public finance will continue. Following PIA, where two large local conglomerates showed collective bidding interest of $1.2bn, the privatization of power distribution companies has been laid out.

It is drawing foreign interest for the first time, including from three Turkish firms. The minister also stressed private sector-led growth through public-private partnership structures, and a shift in bilateral engagement with partners from "aid" to "trade and investment".

On the new economy, he said the focus will be on AI, Web 3.0 and blockchain. IT freelancers generated $1.6bn in IT export services last fiscal year, and upskilling them in blockchain coding could move them from $50 tasks to $240 tasks.

On access to finance, Rs76bn has been disbursed to first-time buyers under the affordable housing scheme, out of over Rs400bn approved by banks. Under the Zarkhez Scheme, an end-to-end digital, collateral-free facility for small farmers, Rs6bn has been approved and over Rs2bn disbursed in seven to eight months.

The export refinance limit has been raised from Rs1tr to Rs1.5tr, with 20% mandated for SMEs in the supply chain at a subsidized rate of 4.5%.

Addressing microfinance institutions, the minister asked them to focus their KPIs on incremental lending, meaning new borrowers in agriculture and SMEs rather than repeat lending.

He also asked them to move from collateral-based lending to cash-flow and repayment-capacity assessment using digital credit scoring engines and alternative data. Finally, he asked them to track outcome-based metrics, including borrower graduation from small to medium to corporate enterprises, job creation and women entrepreneurship.

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