BANGKOK: Pakistan has so far absorbed the shock of soaring energy prices triggered by the U.S.-Israeli war on Iran, but attacks on infrastructure in Saudi Arabia and other Gulf countries are worrying for the country's longer-term economic outlook, Finance Minister Muhammad Aurangzeb said Saturday.
In an interview with AFP on the sidelines of the International Monetary Fund-World Bank Annual Meetings in Bangkok, Aurangzeb said Pakistan had secured enough energy supplies through November and was now planning for the winter months, when household demand typically spikes.
"The first-order impact has been negotiated well by Pakistan," he said. "We've had no shortage, no queues at the gas stations, and no law and order situation, which at times we have seen in some of the countries."
He said the government would not procure spot LNG cargoes unless it saw "an absolute dire need," noting they tend to be far more expensive than previously contracted shipments.
Global energy prices have surged since the U.S. and Israel launched the war on Iran in February, as Tehran's retaliatory action has targeted Washington's Gulf allies and curtailed oil and gas supplies. With Yemen's civil war flaring again, Houthi fighters there have repeatedly attacked Saudi infrastructure, including energy facilities and airports, in recent days.
Aurangzeb expressed alarm at the escalation, saying damage to such sites would delay a return to economic normalcy.
"What is now the worrying part of it is when the energy infrastructure starts getting hit," he said. "I, to be very honest, I don't know where that would go. But one thing is very clear: that if the infrastructure continues to get hit, the return to normalcy, even if things subside, will take longer."
Pakistan has been a frequent customer of the IMF, the lender of last resort to countries on the brink of default. It is currently in the midst of its 25th program with the fund — at least 11 of which have been outright bailouts — since gaining independence in 1947.
With global debt stocks running high, the IMF has called at this year's annual meetings on all economies, even those most vulnerable to the Iran war shock, to pursue fiscal consolidation to avoid a potential crisis.
"Fortunately for us, we have been on this fiscal consolidation path for a while," Aurangzeb said with a rueful smile.
The country's tax revenues have grown significantly in recent years, and the finance minister said the government was targeting tax theft by private sector businesses that collect sales tax from consumers but never deposit it in government accounts. Such theft accounts for billions of dollars, he said, adding there remained "room for improvement" on income tax collection as well.
He said the government's reform agenda had faced resistance from industry, lobbying groups and vested interests.
"Every reform, everything that you try to do when you try to change the status quo, there is pushback," he said.
The minister is leading Pakistan's delegation and holding high-level engagements with international financial institutions, finance ministers, policymakers and investors. On Friday, he met World Bank Group President Ajay Banga at a dinner hosted by the Thai prime minister on the sidelines of the annual meetings, state-run Pakistan TV reported.
Pakistan remains engaged with the IMF under a $7 billion Extended Fund Facility and a $1.4 billion Resilience and Sustainability Facility. The two sides reached a staff-level agreement after a fourth review under the EFF and a third review under the RSF earlier this month, qualifying Pakistan to draw about $1.2 billion from the fund's resources.
