Finance minister sees Pakistan benefit from US-Iran peace deal

ISLAMABAD: Pakistan’s Minister for Finance and Revenue Muhammad Aurangzeb said the recently finalized peace agreement between the United States and Iran marks a “very significant day” for the global economy and a “proud moment for Pakistan.” He added that the development has already fed through to global markets and improved economic sentiment.

Speaking exclusively to Pakistan TV Digital, Aurangzeb said the agreement has triggered a relief rally across global equity markets and commodity prices, particularly oil and has also lifted sentiment in Pakistan’s own stock market.

"It's a very significant day. It's a very proud moment for Pakistan and a great moment for the global economy," said the minister.

He said Pakistan’s leadership had played a role in facilitating engagement between the parties, noting that Prime Minister Shehbaz Sharif and Chief of Defense Forces Field Marshal Asim Munir had received trust and recognition from both the United States and Iranian leadership during the process. 

"Since the time this conflict started, almost three months back, Pakistan has negotiated what I call the first-order challenges extremely well, as a whole government approach," he said.

He described the outcome as the result of sustained diplomatic effort carried out with “earnestness, zeal, fervor, not giving up,” until the agreement was concluded.

The minister said global financial markets have responded positively, with major stock indices rising and oil prices declining. He said Pakistan’s stock market also reflected the improved sentiment.

Aurangzeb said Pakistan had successfully managed the recent period of geopolitical tension over the past three months without major domestic disruption. He said there were no shortages or law-and-order breakdowns, although higher petroleum prices had increased pressure on the import bill. He said the situation was managed relatively well compared with other economies, including those in Southeast Asia and beyond.

Aurangzeb added that the easing of tensions reduces, but does not eliminate, macroeconomic risks. According to him, the second- and third-order effects on growth and inflation have been mitigated, though energy infrastructure disruptions mean normalization will take time.

'Positive signal for inflation'

On monetary policy, Aurangzeb welcomed the State Bank of Pakistan’s decision to keep the policy rate unchanged, calling it a positive signal for inflation expectations. He said inflation in recent months has largely been driven by imported shocks, particularly petroleum prices, which also contributed to earlier tightening in monetary conditions.

Outlining the growth outlook, he said Pakistan’s economy was originally expected to grow between 3.75% and 4.75% before the geopolitical shock, with growth exceeding 4%. Following the disruption, projections were revised to 3.7% for the current fiscal year and 4% for the next. He said there remains upside potential if conditions continue to improve, supported by trends in large-scale manufacturing and agriculture.

Senator Aurangzeb said Pakistan’s inflation target for the next fiscal year is 8.2%, but stressed that inflation must be assessed alongside external account pressures, including the current account balance. He said earlier projections were stronger before the shock and that imported inflation had been the main driver of recent increases. He added that easing geopolitical tensions could strengthen both fiscal and external buffers.

On Iran, he said it was premature to speculate on the impact of any potential sanctions relief. However, he said that if sanctions are eased or removed, there would be meaningful opportunities for bilateral trade and investment, depending on how the final agreement framework evolves.

He said Pakistan remains fully committed to its 36-month IMF program and that all policy measures are being implemented in consultation with the Fund. He said continued engagement with the IMF remains central to maintaining macroeconomic discipline.

The finance minister also pointed to improving investor sentiment, citing stronger capital market activity, including 11 IPOs this year compared with three last year, as well as strong subscription levels in recent listings. He said this reflects growing confidence in Pakistan’s economic direction.

'Lowest fiscal deficit'

On fiscal performance, he said Pakistan has achieved its lowest fiscal deficit in several years and is currently running a primary surplus. He said remittances and digital inflows are supporting external stability, but stressed that structural challenges remain, particularly the need to expand exports to ensure long-term sustainability.

He said the government is shifting its focus from stabilization toward export-led growth, with reforms aimed at supporting industry, exporters, and salaried individuals. He said subsidies remain part of the fiscal framework but are being rationalized, with spending increasingly directed toward productive sectors that generate employment.

He highlighted agricultural financing initiatives worth Rs300 billion, including collateral-free loans for small farmers, as well as more than Rs100 billion in youth-focused lending programs. He said these measures are intended to improve financial access and inclusion.

Regarding Zerkhazy (agricultural) financing, the minister said that "for which we have said we are going to have, you know, 300 billion of financing" is available.

"This is for the small farmer..." adding that "this is collateral-free."

Aurangzeb also addressed the impact of artificial intelligence on the labor market, warning that entry-level freelance coding jobs earning around $10 to $12 per hour are at risk of disruption. However, he said re-skilling in areas such as AI and blockchain could significantly increase earning potential, potentially raising incomes to between $50 and $250 per hour.

He concluded that Pakistan is moving from macroeconomic stabilization toward a more sustainable growth model driven by exports and investment. While he said easing geopolitical tensions provides additional support, he emphasized that sustained progress depends on continued execution of structural reforms.