Pakistan plans $7billion sovereign wealth fund, says finance minister

Finance Ministry officials said the Sovereign Wealth Fund Act was introduced in 2023 and that the proposed amendments would clarify the fund's scope. They said major state-owned enterprises had been brought together to establish the fund, which would have an estimated value of $7 billion.

The committee chairman questioned the government's current position, observing that the explanation given in 2023 appeared different from the one being presented now. Briefing the committee on debt management, Aurangzeb said the government was replacing expensive short-term borrowing with loans carrying maturities of five to 10 years.

He said Pakistan had previously faced pressure from frequent debt repayments and refinancing requirements, often having to renew bank financing every three months. The minister said fiscal discipline had improved several economic indicators.

He claimed the fiscal deficit had declined from 12.5 per cent to 2.5 per cent, while the current account deficit stood at 0.1 per cent of gross domestic product (GDP) during the previous fiscal year. He projected that the current account deficit would remain between zero and one per cent of GDP in the ongoing fiscal year.

However, he cautioned that stronger economic growth could increase imports and put pressure on the external account. Aurangzeb said higher oil prices had also increased pressure on the import bill. He put the country's foreign exchange reserves at $21.5 billion, describing them as the highest level in Pakistan's history.

He said maintaining economic stability remained the government's main priority, warning that losing stability was easy but restoring it could take four to five years.

The finance minister said Pakistan was also working to reduce its dependence on external borrowing., external debt repayments amounted to $4.5 billion last year and were expected to fall to around $4 billion in the current fiscal year and $3.5 billion in the next.

He said the government was pursuing a cautious economic policy to avoid returning to international lenders for further financial assistance. Aurangzeb also said Pakistan's sovereign credit rating had improved from B-minus to B. He expressed the hope that the country could achieve a B-plus rating by the end of the current fiscal year or early in the next one.

He said Pakistan ultimately aimed to move beyond the B-plus category and enter the double-B credit rating range. The country's highest sovereign rating in the past had been B-plus, he added. The minister further said that assistance and rehabilitation efforts should be financed through domestic resources whenever fiscal space allowed.

He said the country was not facing an unusual cash shortage or law and order situation. Commenting on the global economic outlook, Aurangzeb said uncertainty remained despite some stability in the international economy. He pointed to economic difficulties in European countries and highlighted the importance of Pakistan's relations and cooperation with Gulf states.