• Finance minister claims significant strides in stabilising economy
• Says measures implemented to expand tax base, plug leakages

ISLAMABAD: Finance Minister Muhammad Aurangzeb on Tuesday urged the leading US rating agency — Moody’s — to improve Pakistan’s credit rating and help its return to international capital markets at favourable conditions. Pakistan has been postponing the launch of international bonds since July 2021 due to challenging macroeconomic conditions and resultant poor credit rating and relying mostly on time deposits from friendly nations to meet external liabilities and stay afloat.

Moody’s had upgraded Paki­stan’s credit rating by one notch to Caa2 from Caa3 (downgraded in February 2023 due to suspension of the IMF programme) and changed its outlook to positive from stable for improving macroeconomic conditions, including liquidity and external position from very weak levels.

On Tuesday, Mr Aurangzeb led Pakistan’s economic team, including Minister of State for Finance Bilal Azhar Kayani, State Bank of Pakistan Governor Jameel Ahmed, and senior officials from relevant ministries, and held a virtual engagement with Moody’s Rating Agency.

The rating agency was provided an in-depth briefing on Pakistan’s macroeconomic outlook, reform agenda, and financial stability.

During the session, the minister apprised the Moody’s team of the significant strides Pakistan has made in stabilising its economy and laying the foundations for sustainable and inclusive growth, said an official statement. He underlined the successful completion of the final IMF review under the Stand-By Arrangement, including the disbursement of the second tranche and progress under the Resilience and Sustainability Facility (RSF), as key milestones that have restored confidence in Pakistan’s economic management.

The minister highlighted a series of structural reforms undertaken by the government to anchor long-term stability. These included prudent fiscal measures in the recently announced budget, tariff and trade liberalisation geared towards export-led growth, and concerted efforts to rationalise expenditure. The ongoing discussions with the United States on preferential tariff access were also noted as making encouraging headway.

The meeting further outlined Pakistan’s re-engagement with global financial markets, including the successful arrangement of $1 billion in financing from the Middle East, plans for an inaugural Panda bond, and Pakistan’s intent to explore the Eurobond and other international debt markets as credit ratings improve.

The statement claimed that the Pakistani team presented evidence of macroeconomic recovery, including a reduction in inflation, a cut in the pol­i­­cy rate, stabilisation of the exchange rate, a current account surplus, and a surge in foreign exch­a­­nge reserves. Impro­vements in remittance infl­ows and export performance were also cited as signs of resilience and renewed investor confidence.

The Moody’s team was provided an overview of Pakistan’s reform journey, with emphasis on improving the tax-to-GDP ratio through technology-driven tax administration reforms and robust enforcement measures.

The finance minister emphasised that under the direct oversight of the prime minister, who chairs regular meetings on tax reform, the government was impl­e­m­e­nting measures to expand the tax base, plug leakages, and enh­ance compliance. He noted that the Rs2 trillion revenue delta achieved this year had come thro­ugh autonomous efforts, and the government was committed to reaching a tax-to-GDP target of 13 to 13.5pc in the next few years.

He also addressed queries from the Moody’s team and reiterated Pakistan’s commitment to staying the course on macroeconomic reforms, including in areas of privatisation, restructuring of state-owned enterprises and rightsizing of government.

Senator Aurangzeb expressed optimism that the improving macroeconomic indicators and reform momentum would be positively acknowledged by rating agencies.

Published in Dawn, July 16th, 2025