LocationsInterview with
H.E. Senator Muhammad Aurangzeb
Federal Minister of Finance and Revenue, Government of Pakistan
A successful Pakistan by 2030 depends on balancing fiscal discipline with strategic SDG investments.
How do you assess Pakistan’s current financing for development landscape in the context of rising global economic uncertainty, an evolving multilateral finance architecture including the growing role of new development partners such as China, BRICS institutions and regional funds? How is Pakistan adapting its development finance strategy and external cooperation approach in response?
Pakistan’s financing for development landscape is transforming under global economic uncertainty due to the evolving multilateral finance structures and the growing influence of non-traditional partners such as China and BRICS institutions. The country has implemented fiscal reforms under programs, achieving modest GDP growth and stabilizing inflation. Reforms have included broadening the tax base, reducing energy inefficiencies and expanding digital financial infrastructure.
Pakistan relies on traditional multilateral institutions such as the IMF and the World Bank. The IMF’s Extended Fund Facility has provided US$7 billion for macroeconomic stabilization, and the first review has been successful. Credit rating upgrades from Moody’s and Fitch reflect improved fiscal credibility. However, despite this support, limited concessional financing hinders Pakistan’s ability to meet the SDGs.
China remains Pakistan’s most significant development partner. The partnership focuses on technology, infrastructure and industrial modernization. New agreements have been made for AI, blockchain and renewable energy and Special Economic Zones (SEZs) aimed to boost exports.
Pakistan is also exploring innovative capital market strategies and identifying alternative financing with a diversified investor base. This includes the inaugural Panda Bond for the China market, sharia-compliant climate-driven sukuks, SDG-aligned finance including carbon credits, green bonds and blended finance platforms. Notably, the first Green Sukuk was successfully closed with 5.4x oversubscription from investors. Pakistan is also tapping into the diaspora with retail investment instruments, developing a swaps market, securitization options, and working with the New Development Bank, among others.
The Carbon Market Policy / National Climate Finance Strategy has also been launched, aiming to mobilize climate finance for adaptation and mitigation with the aim of 50 percent reductions in emissions by 2030.
Additionally, partnerships with Turkey and Gulf states are significantly important. To adapt to global economic transitions, Pakistan is pursuing an export-led growth strategy and promoting SEZs to improve trade growth. Overall, success will depend on structural reforms, export diversification, climate adaptation and by mitigating geopolitical tensions and debt risks management.
Pakistan has engaged closely with the IMF and other IFIs. How is the government balancing short-term stabilization with long-term investment in development priorities?
Pakistan is navigating short-term economic stabilization through reforms led by home-grown economic agenda while advancing long-term development goals through fiscal consolidation, monetary policy and restructuring energy sector. As a result, inflation is under control and foreign reserves have improved, averting default. The government has prioritized development through expanded social safety nets and climate resilience projects while efforts to privatize loss-making state-owned enterprises have been increased. Finally, structural reforms will boost human capital and private sector growth.
What key measures is the government undertaking to mobilize domestic private capital and deepen capital markets for SDG-aligned sectors such as health, education and infrastructure using instruments like thematic bonds, blended finance and public-private partnerships?
The Government of Pakistan is implementing targeted measures to mobilize domestic private capital and deepen capital markets for SDG-aligned sectors (health, education, and infrastructure development). This includes the introduction of green and social bonds for renewable energy, healthcare and education projects. The Securities and Exchange Commission of Pakistan has established frameworks for these instruments. Further, blended finance mechanisms are being leveraged to de-risk private sector participation. PDF combines public guarantees with private capital for projects for sectors aligned to the SDGs. Public-private partnerships are being prioritized through relevant policy incentives including tax breaks and fast-track approvals. To deepen capital markets, the State Bank of Pakistan has introduced priority-sector lending mandates. This requires banks to allocate 5 percent of portfolios to SDG sectors by 2026. Digital platforms such as the Roshan Digital Account are expanding to channel diaspora investments into public-private partnerships. The Pakistan Mortgage Refinance Company now issues green housing bonds to finance climate-resilient urban projects. Pakistan is also collaborating with the Asian Development Bank to establish a Credit Enhancement Facility to boost investor confidence. These efforts align with national targets, including allocating 15 percent of public spending to SDGs by 2030.
With Pakistan’s fintech sector expanding, how does the government envision the role of digital finance in promoting financials, enhancing domestic resource mobilization and improving access to development finance?
The Government of Pakistan views digital finance as central to advancing financial inclusion. Strengthening domestic revenue generation and unlocking development funding requires rapid fintech expansion. The National Financial Inclusion Strategy leverages instant payment platforms such as Raast. This strategy is central to reducing the 23 percent financial exclusion gap. Mobile wallets serve a large number of users while digital banking licenses issued to entities like NayaPak Digital Bank target underserved SMEs and freelancers. Digital tools are critical for improving Pakistan’s low tax-to-GDP ratio. Initiatives such as Tajir Dost Scheme aims to digitize merchant registrations. AI-driven analytics enhance tax compliance and boost revenue collection. To attract development finance, Pakistan integrates fintech into SDG projects. While blockchain pilots ensure transparency in climate and health funding. Challenges do remain, cybersecurity risks, low digital literacy and interoperability gaps which are being addressed through the National Cybersecurity Policy 2023. The National Digital Commission will aim to unify these efforts.
As we approach the final five years of Agenda 2030, what would a successful financing for development strategy look like for Pakistan by 2030? What political, economic or institutional shifts are required to get there?
Achievement of Agenda 2030 depends on how Pakistan prioritizes a financing strategy that integrates domestic resource mobilization and climate resilience. Growth must be inclusive and should be supported by structural reforms. Expanding the tax-to-GDP ratio is central to this effort. This can be achieved through right taxation policies, digitized compliance mechanisms and broadening the tax base. Efforts should also include underutilized sectors such as retail, agriculture and real estate.
Capital market reforms should focus on scaling thematic bonds focusing on green and SDG-aligned instruments. Public-private partnerships in critical infrastructure and social sectors should be accelerated through streamlined approval processes and better risk-sharing frameworks.
Sustainable debt management is critical. It requires concessional restructuring with bilateral creditors and refinancing high-cost debt. Diversifying financing sources through engagement with non-traditional partners including BRICS institutions will reduce dependency on volatile external borrowing.
Climate resilience will be prioritized by scaling renewable energy projects to meet renewable targets by 2030 alongside accessing international climate finance for adaptation infrastructure. Initiatives such as the Living Indus Initiative will focus on flood-resilient agriculture and urban systems to mitigate climate risks.
Human capital development and digital transformation are equally important. Programs like Uraan Pakistan’s DigiSkills and Kamyab Jawan will enhance youth employability in tech-driven sectors. Additionally, expanding digital financial ecosystems through Raast aims to achieve 90 percent financial inclusion. This will assist in integrating SMEs and marginalized populations into formal economic networks.
Achievement of these goals depends on political, economic and institutional shifts. Political consensus on long-term reforms including provincial tax harmonization, SOE privatization, and other key issues, is essential to counter resistance and short-term policymaking. The core economic shift is transitioning to export-led growth through SEZs combined with phased energy sector reforms. This will reorient the economy toward sustainable productivity. Institutional digitizing for effective governance including e-services, establishing autonomous SDG monitoring bodies and judicial reforms to enforce contracts will strengthen state capacity and public trust.
A successful Pakistan by 2030 depends on balancing fiscal discipline with strategic SDG investments. It also requires integrating initiatives such as Uraan Pakistan into a cohesive framework.