KARACHI, Oct 7: Pakistan’s foreign exchange reserves have reached a record $21.4 billion while economic growth is expected to exceed 4% in the current fiscal year, Finance Minister Senator Muhammad Aurangzeb said on Wednesday, outlining the government’s next phase of economic reforms after what he described as significant progress on stabilisation.
Addressing the 10th Annual Microfinance Conference of the Pakistan Microfinance Network virtually, Aurangzeb said the government’s six core priorities were macroeconomic stability, sustainable growth, structural reforms, trade and investment, the new economy and wider access to finance.
He said Pakistan’s twin deficits, which had previously climbed to around 12.5% of GDP at their peak, had fallen to 2.6% by the end of the last fiscal year.
According to the minister, the country’s $21.4 billion in foreign exchange reserves are now sufficient to cover nearly three months of imports.
Aurangzeb also pointed to three upgrades in Pakistan’s sovereign credit rating since April 2025 and said the country had returned to global capital markets through the successful issuance of a $3 billion Eurobond.
He said participation from investors in Asia, the Middle East, Europe and the United States reflected renewed international confidence in Pakistan’s economy.
The finance minister cautioned, however, that macroeconomic stability would need to be maintained if Pakistan was to avoid a return to recurring boom-and-bust cycles.
He said economic policy in the next phase must shift away from consumption-led expansion towards sustainable and responsible growth.
Pakistan’s economy had contracted three years ago, he said, before expanding by 3.7% in the last fiscal year. Growth of more than 4% is now expected in the current fiscal year.
Aurangzeb said structural reforms in taxation, energy, state-owned enterprises, privatisation and public finance remained central to the government’s economic agenda.
He added that the government wanted a larger role for the private sector in economic activity, citing a combined bid of nearly $1.2 billion by two major domestic investor groups in the privatisation process for Pakistan International Airlines.
He also said international investor interest was growing in the planned privatisation of electricity distribution companies, with three Turkish companies showing interest in the first DISCO being offered.
The minister said Pakistan was moving from an aid-dependent model towards trade and investment, arguing that stronger commercial and investment ties with bilateral partners would be more important for long-term economic resilience.
He also highlighted the role of artificial intelligence, blockchain and Web3 in what he described as the “new economy.”
Pakistani freelancers earned $1.6 billion from exports of IT services during the last fiscal year, Aurangzeb said, adding that young people needed both upskilling and reskilling to move into higher-value digital services.
On financial inclusion, the minister said around Rs76 billion had been provided to first-time home buyers under affordable housing initiatives, while the banking system had approved more than Rs400 billion.
He said nearly Rs6 billion had been approved under a digital, collateral-free financing scheme for small farmers over the past seven to eight months, with more than Rs2 billion already disbursed.
Aurangzeb called for stronger cooperation between commercial banks and the microfinance sector to expand financing for small and medium enterprises, agriculture and affordable housing.
He urged microfinance institutions to strengthen digital lending systems, improve customer experience and develop more effective credit-scoring models based on alternative data.
He said lending decisions should not depend solely on collateral but should also consider repayment capacity, seasonal factors and affordability.
The finance minister also called for a greater focus on the real economic and social outcomes of microfinance rather than the volume of loans issued.
Expanding the number of new borrowers in agriculture and the SME sector should be a priority, he said.
Aurangzeb said the export refinance limit had been increased from Rs100 billion to Rs150 billion, with 20% of the enhanced facility reserved for SMEs.
Businesses linked to the value and supply chains of major exporters would also be eligible for financing at a special rate of 4.5%, he said.
The minister added that the success of microfinance should also be measured through the growth of small borrowers into medium and larger enterprises, job creation and increased economic participation by women.
He said stronger participation by women entrepreneurs was essential for deeper financial inclusion and more sustainable livelihoods across Pakistan.