Federal Finance Minister Muhammad Aurangzeb has downplayed concerns over the economic repercussions stemming from recent military tensions between Pakistan and India. In an exclusive interview with Reuters, Aurangzeb described the financial impact of the conflict as “minor and manageable” within Pakistan’s current fiscal capacity.
The tensions arose after a deadly April 22 attack in Pahalgam, Indian-occupied Kashmir, that resulted in 26 fatalities. India accused Pakistan of involvement without providing evidence, a charge that Islamabad strongly rejected.
Aurangzeb assured that Pakistan’s economy remains resilient, stating, “The financial impact of the skirmish is not significant. It can be absorbed within the fiscal space available.” He reaffirmed the government’s commitment to maintaining defence readiness without compromising economic reforms. However, he declined to comment on possible defence budget increases, calling such speculation “premature.”
Operation Bunyan-un-Marsus and Ceasefire
On May 10, Pakistan launched ‘Operation Bunyan-un-Marsus’ in retaliation to what it termed Indian aggression. According to military sources, the operation targeted major Indian airbases such as Pathankot and Adampur, a BrahMos missile storage facility, and an S-400 air defence system. Pakistan reportedly downed five Indian aircraft and struck brigade-level headquarters across the Line of Control (LoC).
Soon after, a ceasefire agreement was reached, mediated by U.S. President Donald Trump. Trump emphasized that trade interests played a major role in achieving de-escalation and reiterated U.S. willingness to support ongoing peace efforts between the two nuclear-armed nations.
Trade and Water Diplomacy
Minister Aurangzeb welcomed the U.S. mediation, saying Pakistan looks forward to concluding trade discussions with Washington, particularly around the import of high-quality cotton, soybeans, hydrocarbons, and other commodities. He noted that Pakistan is hopeful of reaching mutually beneficial trade terms soon.
He also addressed the critical issue of water diplomacy, asserting that India must reinstate the Indus Waters Treaty, which it had unilaterally suspended during the tensions. “Water should not be used as a weapon. The Indus River is our economic and agricultural backbone,” he stated, underlining the treaty’s significance for Pakistan’s agricultural economy.
IMF Programme and Budget Outlook
Aurangzeb confirmed that the International Monetary Fund (IMF) has approved the release of a $1 billion tranche under its $7 billion bailout programme on May 9. The funds are expected to reach Pakistan by Tuesday.
In addition, the IMF has sanctioned a new $1.4 billion loan aimed at boosting climate resilience, a vital component of Pakistan’s long-term economic sustainability plan.
He revealed that budget talks with the IMF are scheduled between May 14 and 23, with Pakistan’s next federal budget for the fiscal year starting in July currently in its final stages of preparation.
On trade with the U.S., Aurangzeb mentioned that Pakistan is facing a 29% tariff on exports due to a $3 billion trade surplus. However, this tariff has been suspended for 90 days since April, providing temporary relief to exporters.
