Pakistan secures energy supplies through November, prepares for winter demand
BANGKOK: Pakistan has so far withstood the shock from soaring energy prices caused by the US-Israeli war on Iran, but attacks on infrastructure in Saudi Arabia and other Gulf countries are raising concerns about the country’s longer-term economic outlook, Finance Minister Muhammad Aurangzeb said on Saturday.
In an interview with AFP on the sidelines of the International Monetary Fund (IMF)-World Bank Annual Meetings in Bangkok, Aurangzeb said Pakistan had secured enough energy supplies to last through November and was now planning for the winter months, when household demand typically rises.
“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 added that unless the government saw “an absolute dire need”, it would not procure spot cargoes of liquefied natural gas (LNG), which tend to be far more expensive than previously contracted shipments.
Since the US and Israel launched the war on Iran in February, global energy prices have surged as Tehran’s retaliatory actions have targeted Washington’s Gulf allies and disrupted oil and gas supplies.
With Yemen’s civil war flaring up again, the Houthi rebels have also 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.”
‘Pushback’
Pakistan has frequently turned to the IMF, a lender of last resort for countries on the brink of default.
It is currently undertaking its 25th programme with the Fund — at least 11 of which have been outright bailouts — since gaining independence in 1947.
With global debt levels remaining high, the IMF has called on all economies at this year’s annual meetings, including those most vulnerable to the economic shock from the Iran war, 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.
Pakistan’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 collected sales tax from consumers but failed to deposit it into government accounts.
Such theft accounted for billions of dollars, Aurangzeb said, adding that there was still “room for improvement” in income tax collection.
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.
Aurangzeb 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 Television reported.
“The occasion provided an opportunity for informal interaction alongside the high-level engagements at the annual meetings,” it said.
Pakistan remains engaged with the IMF under a US$7 billion Extended Fund Facility (EFF) and a US$1.4 billion Resilience and Sustainability Facility (RSF).
The two sides reached a staff-level agreement earlier this month following the fourth review under the EFF and the third review under the RSF, qualifying Pakistan to draw about US$1.2 billion from the Fund’s resources. - The Dawn/ANN
