Business

Aurangzeb ‘quite hopeful’ Pakistan can achieve close to 3.5pc GDP growth during ongoing fiscal year

Published

5 days ago

October 22, 2025

Finance Minister Muhammad Aurangzeb has said he is “quite hopeful” that Pakistan could manage to achieve GDP growth of close to 3.5 per cent during the ongoing fiscal year despite the impact of recent floods.

The finance czar shared this projection during an interview on CGTN America programme ‘One on One’, which was published on Tuesday.

During the interview, the finance minister was asked how big a challenge the recent devastating floods posed to Pakistan’s economic recovery.

To that, Aurangzeb began his reply by underlining that climate change was an “existential issue for Pakistan. We are living it day in and day out”.

He then went on to recall previous floods and their impact, and further stated:
“We grew at 3pc GDP last year. We had estimated that we would grow a little over four per cent this year, but now, given the flood situation, this will shave off a certain percentage around that. But, I am still quite hopeful that we can manage anything close to 3.5pc during this fiscal year.”

At the outset of the interview, the finance minister was asked about the efforts to restore Pakistan’s economy and the main challenges being faced on that front.

To that, Aurangzeb said Pakistan had “consolidated gains on the macroeconomic stability front. […] Inflation continues to be a good story, which is now in single digits. [The] policy rate has been halved. And as a result of that, what we have seen during the course of this year is [that] all global rating agencies have upgraded us during the course of this year. [It] started with Fitch, then S&P, and then two months back Moody’s upgraded us. So it is after a hiatus of two and a half or three years, we have alignment between the rating agencies.”

In reply to a question about the International Monetary Fund (IMF), with which Pakistan has entered a $7bn bailout deal, Aurangzeb recalled that the global money lender and Pakistan had agreed upon a staff-level agreement on its loan programmes earlier this month, which would allow the country to access $1.2 billion after approval from the fund’s board.

“We are very grateful that the management of the Fund continues to repose trust and confidence in the authorities in Pakistan in terms of staying the course, especially with respect to structural reforms,” the minister said, highlighting that Pakistan had made progress in the areas of taxation, energy, state-owned enterprises, privatisation and public finance.

“Privatisation was one area where we didn’t do well,” he acknowledged. But, he added, “today, we had the first asset — it’s a small bank, but it’s been on the privatisation list for a long time. It’s been nominated out to the UAE, which came in with a very successful bid. So it’s going to be handed over, and they are going to invest further in terms of increasing its footprint, taking it digital, etc.”

About the Pakistan International Airlines, he said “we are very sanguine” that it is going to be privatised before the year’s end.

“As a result of all of these developments, we have been able to return to the commercial markets,” he added. “We tapped the Middle Eastern bank borrowing again after a gap of two and a half years […] We are also now looking forward to actually printing the inaugural Panda Bond before the year is out.”

At that, Aurangzeb was asked whether Pakistan now being able to access commercial banks was a direct consequence of upgrades from rating agencies.

“Indeed,” he replied. “I keep on saying that macroeconomic stability is not an end in itself, it’s a means to an end. We repaid $500 million of Eurobond payment which was due on September 30 […] We are now clearly poised well to repay the next tranche, which is $1.3 billion, in April of next year.

“But we are refreshing our GMTN (global medium-term note) with a view to go for now a major print after the Panda bond. We haven’t decided whether it’s going to be Euro, USD or Islamic sukuk, but we will be looking for a large print during the next calendar year,” he said.

On Pakistan-China ties and what had this partnership done for Pakistan economically, Aurangzeb said, “It is a longstanding, ironclad partnership.“

The finance minister further stated that “everything that happened in the CPEC (China-Pakistan Economic Corridor), which was a flagship for BRI (Belt and Road Initiative) — The phase one was all about infrastructure. Now, phase two is all about monetisation of that infrastructure, using the special economic zones, etc. This is very much private sector to private sector”.

Aurangzeb then mentioned he had accompanied Prime Minister Shehbaz Sharif to Shenzhen last year, where a number of MoUs were signed.

“The difference this time around in Beijing was that we had 24 joint venture agreements signed. So we have travelled from MoUs to JV agreements, which means there is traction now. It is going to be very much private-owned enterprises from China working with the private sector. And our role is going to be making sure that we provide the necessary ecosystem.”

Asked what was the focus of CPEC Phase II, the finance minister said, “The focus is investment — first of all, making sure that the $19 billion dollar plus trade that we have, we take it to the next level. We have an Free Trade Agreement (FTA) in place, and this can now be upgraded. That’s one part of it.

“The second part of it is investments. And investments in all areas of mutual interest. It’s minerals and mining, it’s agriculture, it’s AI (artificial intelligence) and IT (information technology).”

He also underlined the potential for cooperation in the pharmaceutical sector.

“When I say pharma, I think we have a huge opportunity to get the vaccination production going in Pakistan. We saw it firsthand when the unfortunate Covid situation came in and we had to go helter-skelter finding the vaccinations. This is one of the key areas where we can work with Chinese enterprises to get that production going in Pakistan.“

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Business

Challenges to Pakistan’s cotton sector are far from over

Published

6 minutes ago

October 27, 2025

hussainbinnoman3@gmail.com

https://www.dawn.com/news/1951371

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Business

Pakistan’s power planning — discipline or debt

Published

19 minutes ago

October 27, 2025

hussainbinnoman3@gmail.com

Pakistan’s power sector has long been a story of overcorrection. For years, the debate centred on supply shortages, with policymakers rushing to add generation at any cost. Today, the pendulum has swung the other way: surplus capacity, idle plants, and consumers crushed by capacity payments.

The key requirement for ensuring a stable electricity supply nationwide under all circumstances is effective system planning. The Indicative Generation Capacity Expansion Plan (IGCEP) provides a roadmap to enhance energy security, sustainability, and affordability while considering policy and macroeconomic factors. Since 2021, the System Operator (SO) under the National Transmission and Despatch Company (NTDC) has diligently prepared annual updates to this plan.

By design, the IGCEP is a least-cost plan. Each year, the SO prepared the 10-year generation roadmap using the PLEXOS software under the assumptions specified in the Grid Code 2023. It is guided by the National Electricity Policy 2021 and the National Electricity Plan 2023– 2027. The IGCEP determines which plants will be built over the next decade based on economics and system needs.

The recent IGCEP (2025-35) prepared by an Independent System and Market Operator (ISMO) has been released by National Electric Power Regulatory Authority (Nepra) for stakeholder input and comment. Its main strength lies in its transition from quantity to quality in capacity planning. Only projects already under construction or those meeting strict criteria are treated as ‘committed’ while all other candidate plants must justify their inclusion based on economic merit. This distinction is what separates affordability from insolvency.

Unlike previous plans, IGCEP 2025–35 is more integrated in its approach. It brings K-Electric into national planning, designs the South–North transmission corridor to shift Sindh’s cheap generation to the north, and includes battery storage systems for flexibility. The energy mix signals a change. By 2035, capacity will reach 63,000 MW, with hydro and renewables (solar, wind, and bagasse) delivering more than half (61 per cent), while nuclear (7.5pc) and Thar coal (5.3pc) ensure a firm supply for the baseload. Furnace oil disappears, imported fuels are capped, and carbon intensity falls from 0.278 kg/kWh to 0.105 kg/kWh.

However, contrary to the Alternative and Renewable Energy (ARE) Policy 2019, which pledged 30pc of installed capacity from non-hydro renewables by 2030, IGCEP 2025–35 falls well short. Even by 2035, five years after the ARE target, solar, wind, and bagasse together will make up only about 27pc of capacity. The gap highlights the growing disconnect between policy ambition and actual planning.

For the first time, the IGCEP highlights the costs of policy deviations. The unconstrained scenario, the model’s pure least-cost build, produces the lowest system expense ($39.1 billion). The rationalised case trims this to projects already under construction or justified on merit, keeping the bill around $47.1bn. By contrast, the forced case, which accommodates every announced scheme, swells costs to $54.8bn by 2035. The difference, over $7bn, is the price of indiscipline.

Hydropower dominates all futures, but here, too, choices matter. Most dams are classed as committed regardless of economics; the Diamer-Bhasha project alone adds an extra $3bn when forced into the plan. Policy-driven solar blocks, tested as sensitivities, impose smaller but still measurable premiums. Making these trade-offs visible is progress, but the warning is clear: once one exception is allowed, others follow, and the least-cost principle unravels.

Suppose a project is added for strategic or policy reasons; it should be limited in scope, capped in cost, and tested for broader environmental risks. Otherwise, Pakistan risks reverting to a pattern where planning discipline gives way to special cases, and affordability is sacrificed.

In Pakistan, the most urgent challenge is demand, which is decreasing. Grid sales fell by around 3.6pc in FY25, with daytime consumption hollowing out as rooftop and commercial solar spread. Net-metered capacity has already exceeded 5.3 GW, while Pakistan imported nearly 22 GW worth of panels in just 18 months. Officials now estimate an annual 10 TWh reduction in daytime demand, even as evening peaks persist.

This mismatch leaves utilities selling fewer units while carrying the burden of contracted plants, a classic ‘utility death spiral’. The risk grows as households and businesses adopt batteries, shifting solar into night-time hours and further eroding grid sales while fixed costs remain. Without a pivot to a demand-driven strategy, the grid will continue to lose relevance.

The IGCEP assumes electricity demand will grow about 4.4pc a year to 2035, assuming GDP growth of 3pc. Given the past grid sales, rooftop solar expansion, and the GDP growth rates, which remained even less than 3pc, the demand may fall short of projections, and plants could remain under-utilised, locking in higher capacity payments.

IGCEP should prioritise a demand-driven growth model. The focus should be on revitalising export industries through marginal cost pricing, shifting captive loads back to the grid through fair wheeling charges under the competitive trading bilateral contract market, and generating new demand through electrified transport, cold chains, and industrial parks. These efforts must align with the Transmission System Expansion Plan for the South–North backbone and K-Electric interconnections. Without timely implementation, low-cost southern power will remain stranded, while expensive plants dictate dispatch.

Mohammad Aslam Uqaili is Professor Emeritus and ex-vice chancellor at MUET. Afia Malik is a senior researcher and energy policy expert based in Islamabad. Shafqat Hussain Memon is an academic researcher in energy based in Jamshoro.

Published in Dawn, The Business and Finance Weekly, October 27th, 2025

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