Pakistan unveils economic plan at Atlantic Council

October 17, 2025 (MLN): Pakistan's economic leadership presented a comprehensive roadmap for fiscal consolidation and sustainable growth at a high profile policy session in the United States capital, emphasizing structural reforms that have restored macroeconomic stability and investor confidence over the past year.

The Atlantic Council hosted an extensive dialogue on Pakistan's reform efforts and future economic challenges, featuring Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb.

The session, titled "Reform efforts in Pakistan and the challenges ahead," was opened by Atlantic Council President and CEO Fred Kempe and moderated by Dr. Aasim M. Husain, former Deputy Director of the IMF's Middle East and Central Asia Department.

Senator Aurangzeb highlighted Pakistan's successful consolidation of macroeconomic stability, validated by the International Monetary Fund and major credit rating agencies.

The government's disciplined fiscal management has delivered tangible results, including improved sovereign spreads and Pakistan's first current account surplus in 14 years a milestone achievement for the South Asian nation.

The minister's appearance came shortly after the IMF revealed a new Staff-Level Agreement with Pakistan, marking successful completion of the program's first year. Dr. Husain, who recently authored the Council's issue brief "Rescuing Pakistan's Economy," congratulated the minister and his team on this achievement.

Addressing Pakistan's recent catastrophic floods, the finance minister identified two existential threats facing the nation: rapid population growth and climate change. In a significant policy shift demonstrating fiscal resilience, the government opted to finance rescue and relief operations through domestic resources rather than international appeals.

"Pakistan has introduced a 300 day national plan to accelerate rehabilitation and build climate resilience," Senator Aurangzeb stated, adding that growth forecasts for fiscal year 2025 have been modestly revised upward to above 3 percent despite flood-related disruptions.

The minister outlined an ambitious fiscal reform program aimed at fundamentally transforming Pakistan's tax architecture. Central to this agenda is the sectoral expansion initiative, which focuses on bringing the agriculture, retail, and real estate sectors into the formal tax net.

The government is also prioritizing technology integration by deploying AI-driven analytics to improve compliance and detection capabilities across the revenue system.

Additionally, enhanced sales tax enforcement measures are being implemented to curb leakages in collection systems, while progressive targets aim to raise the tax-to-GDP ratio from 10.2% to 11% this year, with a medium term goal of reaching 13%.

These structural changes represent a departure from Pakistan's historically narrow tax base, which has constrained public investment and debt sustainability for decades.

By broadening revenue sources and improving collection efficiency, the government seeks to create fiscal space for essential development spending while reducing reliance on external financing.

Senator Aurangzeb highlighted the signing of a National Fiscal Pact with provincial governments, establishing a framework for negotiations on a new National Finance Commission (NFC) Award.

The inaugural NFC meeting is scheduled for early November, following postponement due to flood emergency response.

The federal provincial fiscal coordination mechanism is crucial for Pakistan's governance structure, determining revenue distribution between the center and provinces.

Emphasizing Pakistan's medium term economic vision, the finance minister emphasized a fundamental shift toward private sector-led, export oriented growth.

The new National Tariff Policy aims to enhance competitiveness through strategic reforms, including the gradual reduction of customs duties on raw materials and intermediate goods.

This approach is designed to decrease import dependence across key industries while enabling domestic manufacturers to compete more effectively in global markets.

The government is also providing targeted support for emerging sectors, particularly information technology and mineral exports, which are seen as high potential areas for revenue generation and job creation. Major infrastructure projects like Reko Diq are being positioned as growth catalysts that will unlock significant economic value and attract foreign investment in the coming years.

On monetary policy, Senator Aurangzeb reaffirmed the government's commitment to maintaining a competitive, market-determined exchange rate under State Bank of Pakistan oversight.

He emphasized that sustainable export growth requires not only competitive pricing but also productivity improvements and comprehensive structural reforms.

Dr. Husain concluded the session by commending Pakistan's reform trajectory and expressing optimism about the country's economic recovery prospects. The Atlantic Council dialogue represents growing international engagement with Pakistan's economic transformation efforts.

The session stressed Pakistan's policy pivot from crisis management to structural transformation, with reforms targeting fiscal sustainability, climate resilience, and export competitiveness as pillars of long-term economic stability.

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