S&P Urges Pakistan to Sustain Reform Momentum for Macroeconomic Stability

ISLAMABAD: Standard and Poor’s (S&P) Global Ratings has advised Pakistan to maintain its current trajectory, enhance reform efforts, and prioritize the establishment of lasting macroeconomic stability, supported by international allies, while signaling their willingness to aid the nation in realizing these goals.

The Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, and his team conducted a Zoom meeting on Friday with representatives from S&P Global Ratings as part of the ongoing evaluation of Pakistan’s sovereign ratings. Aurangzeb updated S&P on the advancement of reforms and the outlook for economic stability.

The finance minister delivered a thorough presentation on the government’s agenda for macroeconomic reform and reaffirmed Pakistan’s dedication to fostering sustainable and inclusive economic expansion by boosting productivity and promoting exports.

He underscored the continuation of reforms across vital sectors, including taxation, energy, state-owned enterprises (SOEs), privatization, public finance management, streamlining government functions, and more proactive strategies for managing debt.

The finance minister pointed out that inflation and the current account deficit (CAD) have shown positive trends throughout the year, contributing favorably to overall economic stability. He also highlighted the achievement of surpluses in both the primary balance and the current account as significant accomplishments, demonstrating the improving fundamentals of Pakistan’s economy. He mentioned that the country’s external portfolio is effectively managed, with foreign exchange reserves projected to reach $14 billion by the end of June, bolstered by forthcoming institutional and trade inflows, strong remittances, and decreasing oil prices, all of which are alleviating pressure on the external account.

He attributed the achievement of a primary surplus to strict financial discipline and strong collaboration between the federal and provincial governments. The finance minister highlighted key institutional reforms, including the signing of a comprehensive National Fiscal Pact, the operationalization of the National Tax Council, and the implementation of agricultural income tax, reflecting a unified government approach and a shared national commitment to improving resource efficiency, expanding the tax base, and ensuring long-term inclusive growth.

He stated that the tax-to-GDP ratio is expected to reach 10.6 percent by the end of June, marking progress toward the government’s objective of increasing it to 13 percent by the conclusion of the 37-month Extended Fund Facility (EFF) with the International Monetary Fund (IMF). He added that the separation of the Tax Policy office from the Federal Board of Revenue (FBR) is part of a broader initiative to align tax policymaking with economic value principles rather than administrative convenience.

The finance minister also shared insights from his recent visit to the United States for the World Bank/IMF Spring Meetings, during which he engaged in over 70 meetings in six days with counterparts, Development Finance Institutions (DFIs), investment banks, multilateral and bilateral partners, rating agencies, think tanks, and media outlets.

He conveyed that the feedback received from these stakeholders consistently showed appreciation and support for the structural reforms and macroeconomic stability achieved by Pakistan over the past 14 months. Simultaneously, there was a strong and consistent recommendation for Pakistan to stay committed, intensify reform efforts, and concentrate on securing lasting macroeconomic stability, with international partners offering their support to help the country achieve these objectives.