Gulf energy attacks endanger long-term economy, warns Pakistan finance minister

Pakistan's finance minister has said the country has so far absorbed the shock of soaring energy prices caused by the Iran war, but warned that strikes on energy infrastructure in Saudi Arabia and other Gulf states could hurt its economic outlook over the longer term.

Speaking to news agency AFP on the sidelines of the IMF-World Bank Annual Meetings in Bangkok on Saturday, Muhammad Aurangzeb said Pakistan had secured enough energy supplies to last through November and was now preparing for winter, when household demand typically climbs.

"The first-order impact has been negotiated well by Pakistan," he said, noting there had been no shortages, no queues at fuel stations and no law-and-order problems, which some other countries have experienced. He added that the government would not buy spot LNG cargoes, which cost far more than contracted shipments, unless there was "an absolute dire need".

Global energy prices have jumped since the United States and Israel launched a war on Iran in February. Tehran's retaliation has targeted Washington's Gulf allies and restricted oil and gas supplies. Separately, Yemen's civil war has reignited, and the Houthis have repeatedly struck Saudi infrastructure, including energy facilities and airports, in recent days.

Aurangzeb voiced concern over the escalation. "What is now (the) worrying part of it is when the energy infrastructure starts getting hit," he said, adding that continued damage would prolong the return to normalcy even if tensions eased.

IMF programme

Pakistan is in its 25th programme with the International Monetary Fund since independence in 1947, at least 11 of which were outright bailouts. The current arrangement is worth about $7 billion over three years, and the Fund agreed this month to release a $1.2 billion tranche.

At this year's meetings, the IMF urged all economies, including those most exposed to the Iran war shock, to pursue fiscal consolidation given high global debt. Aurangzeb said Pakistan had already been on that path for some time.

He said tax revenues have risen significantly in recent years and that the government was targeting businesses that collect sales tax from consumers but fail to deposit it with the state, a practice he said costs billions of dollars. He added there was "room for improvement" in income tax collection, and acknowledged that reforms had met resistance from industry, lobby groups and vested interests.

Military businesses

Privatising state-owned assets is a key pillar of the IMF programme. Asked about the military's extensive commercial interests, which span real estate to fertiliser, Aurangzeb denied they received public funds. He said the enterprises operate on a standalone basis, are profitable, and that no money from the exchequer is being provided to them. The military has ruled Pakistan directly for roughly two-fifths of its history. Under army chief Field Marshal Asim Munir, it has tightened its hold over key centres of power, even as a civilian government nominally remains in charge.