Finance Minister Muhammad Aurangzeb underscored Pakistan’s strategic shift from seeking aid-based support towards trade- and investment-led engagement to ensure long-term economic sustainability and mutually beneficial partnerships, particularly with the Gulf Cooperation Council (GCC) countries.

In an interview with CNN Business Arabia, Aurangzeb highlighted the vision of Prime Minister Shehbaz Sharif, which reflected Pakistan’s renewed economic confidence and reform momentum.

He said that Pakistan has followed a comprehensive macroeconomic stabilisation program for the past 18 months, which has delivered tangible and measurable results, while inflation has declined to single-digit levels from an unprecedented 38%.

On the fiscal front, Pakistan has achieved primary surpluses, while the current account deficit remains well within targeted limits. According to the finance czar, the exchange rate has also stabilised, and foreign exchange reserves have improved to approximately 2.5 months of import cover, reflecting strengthening external buffers.

He maintained that the country has two major external validations, which indicate Pakistan’s improving economic outlook.

Firstly, he said, all three international credit rating agencies have aligned their assessments this year by upgrading Pakistan’s ratings and outlook. On the other hand, the country has completed the second review under the IMF Extended Fund Facility, with the IMF Executive Board granting its approval earlier this week.

He stated that such developments demonstrate growing international confidence in Pakistan’s economic management and reform trajectory.

The finance minister further emphasised that macroeconomic stabilisation has been achieved through a coordinated approach combining disciplined monetary and fiscal policies with an ambitious structural reform agenda.

“Reforms are being implemented across key areas, including taxation, energy, state-owned enterprises, public financial management, and privatisation, aimed at consolidating stability and laying the foundation for sustainable growth,” Aurangzeb said.

The finance minister also highlighted the significant progress in Pakistan’s improvement of the tax-to-GDP ratio.

“During the last fiscal year, it increased to 10.3 per cent, with a clear path towards 11 per cent,” the finance minister said.

He further explained the government’s objective to reach a level of tax collection that ensures fiscal sustainability over the medium to long term.

“This is being pursued through widening the tax base by bringing previously undertaxed but economically significant sectors such as real estate, agriculture, and wholesale and retail trade into the formal net, alongside deepening compliance by reducing leakages through production monitoring systems and AI-enabled technologies. Simultaneously, the tax administration is being transformed through reforms in people, processes, and technology,” he said.

The minister further highlighted efforts to improve governance in [power] distribution companies, involve private sector expertise, advance privatisation, and reduce circular debt, which has long constrained the power sector.

“Rationalising the tariff regime is essential to making energy more competitive for industry, thereby enabling industrial revival and economic growth,” he stressed.

Senator Aurangzeb acknowledged the longstanding support of GCC countries, including Saudi Arabia, the United Arab Emirates, and Qatar, for their critical role in critical role supporting Pakistan through financing, funding, and cooperation at international financial institutions such as the International Monetary Fund.

“This relationship is now evolving towards a new phase centred on trade expansion and investment flows. Remittances continue to play a vital role in supporting the current account, with inflows reaching approximately $38 billion last year and projected to rise to $41-42 billion this year, over half of which originates from GCC countries,” he added.

He further said, “Pakistan is actively engaging with GCC partners to attract investment in priority sectors including energy, oil and gas, minerals and mining, artificial intelligence, digital infrastructure, pharmaceuticals, and agriculture.”

Expressing optimism regarding progress on a Free Trade Agreement (FTA) with the GCC, he termed the discussions at an “advanced stage”.

Senator Aurangzeb reiterated the government’s strategic direction in shifting the collective focus on trade rather than relying on aid.

“Pakistan’s future lies in fostering trade and investment partnerships rather than reliance on aid,” said the finance minister.

He also emphasised the role of foreign direct investment in supporting the higher GDP growth, generating employment opportunities, and delivering shared economic benefits for Pakistan and its partners.

“The government is fully mobilised to translate this vision into reality.” He concluded.

The State Bank of Pakistan (SBP) has announced a 50-basis-point cut in the policy rate in its final monetary policy decision of the current year, signaling a cautious shift as inflation shows signs of control.

The State Bank has issued its last monetary policy of the current year, reducing the policy rate by 50 basis points. As a result, the base interest rate has been lowered from 11% to 10.5%, according to the central bank.

This marks the first rate cut after a prolonged period of policy stability. The interest rate has been cut by half a percentage point after seven months.

The decision was taken during a monetary policy meeting after a detailed review of key economic indicators, the State Bank said. Officials cited improved inflation trends as a key reason for adjusting the policy stance.

The move reflects a shift away from continuously maintaining high interest rates.

Policy rate timeline

December 2024: Policy rate set at 13%

January 2025: Reduced to 12%

March 2025: Maintained at 12%

May 2025: Further reduced to 11%

June 2025: Maintained at 11%

July 2025: Maintained at 11%

September 2025: Maintained at 11%

October 2025: Maintained at 11%

December 2025: Reduced to 10.5%

The State Bank of Pakistan has cut the policy rate by 0.5 percentage points after maintaining it at 11% for seven months, reflecting a cautious shift toward monetary easing.

Inflation under control, policy stance adjusted

The State Bank acknowledged that inflation has come under control, prompting a change in its long-standing tight monetary policy. Previously, the central bank had kept the interest rate unchanged at 11% for four consecutive policy decisions.

This easing suggests growing confidence in macroeconomic stability.

With the reduction in the policy rate, bank loans for businesses and industries have become cheaper. Analysts say the cut may provide some relief to the private sector by lowering borrowing costs and supporting economic activity.

However, the reduction remains modest compared to market expectations.

Experts point to IMF influence

Economic experts say the State Bank’s tight monetary policy remains influenced by the IMF program, limiting the pace of rate cuts. Despite the reduction, the policy rate is still around five percentage points higher than the current inflation rate of 5.5%, analysts noted.

This gap indicates continued caution by the central bank.

The business community has repeatedly demanded a cut to single-digit interest rates as inflation declines. However, experts say the State Bank has once again ignored these demands, opting for a gradual approach.

Despite the government’s desire, analysts believe interest rates could not be brought to single digits in 2025, reflecting fiscal and external constraints.

Last Updated:December 15, 2025, 16:28 IST

India leads Asia Pacific growth in 2026 with a 6.6 percent rate and 4.2 percent inflation, says Mastercard Economics Institute.

News18

India continues to dominate among Asia-Pacific economies next year with the growth rate at 6.6 per cent and inflation at 4.2 per cent, according to the annual economic outlook for 2026 by the Mastercard Economics Institute (MEI).

Factors that make India among the fastest-growing major economies are favourable demographics, rapid digitization and technological advancements, leading to a growth in global capability centres and Tier 2-3 cities.

The report mentioned that tourism has emerged as a key growth lever with destinations such as Goa, Rishikesh and Amristar attracting experiential and spiritual travelers.

AI Enthusiasm Index score of 8, the report said, shows growing push of AI adoption in the country, harnessing the next wave of productivity gains.

Globally, MEI expects real GDP growth to ease marginally to 3.1 per cent in 2026, compared to an estimated 3.2 per cent in 2025.

Asia Pacific has shown strong resilience despite tariff uncertainty and shifting supply chains that have disrupted global trade, said David Mann, chief economist for Asia Pacific at Mastercard.

He noted that the largely positive outlook for consumers across the region reflects an important trend heading into 2026. Even as trade realignments and technological changes shape the global economy, improving microeconomic conditions in many Asia Pacific markets are supporting demand. Mann added that businesses will need to closely track these underlying demand trends.

According to the report, Asia Pacific continues to remain central to global supply chains despite ongoing realignments. India, ASEAN and the Chinese mainland are playing an increasingly important role as companies rethink sourcing strategies and investment plans.

(With IANS Inputs)

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