Attacks on Gulf energy sites ‘worrying’ for outlook: Aurangzeb

Pakistan has so far withstood the shock of soaring energy prices caused by the Iran war, but attacks on infrastructure in Saudi Arabia and other Gulf countries are “worrying” for its longer-term economic outlook, Finance Minister Muhammad Aurangzeb told AFP on Saturday.

Speaking on the sidelines of the IMF-World Bank annual meetings in Bangkok, Aurangzeb said Pakistan had secured enough energy supplies to last through November and was now planning for winter, when household demand usually 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.”

Unless there was “an absolute dire need”, the government would not buy liquefied natural gas (LNG) on the spot market, where cargoes tend to be far more expensive than contracted shipments, he added.

Global energy prices have surged since the United States and Israel launched the war on Iran in February, as Tehran’s retaliation targeted Washington’s Gulf allies and curtailed oil and gas supplies.

In recent days, Yemen’s Houthis have also repeatedly attacked Saudi infrastructure, including energy facilities and airports.

“What is now (the) worrying part of it is when the energy infrastructure starts getting hit,” Aurangzeb said.

“One thing is very clear: that if the infrastructure continues to get hit, the return to normalcy, even if things subside, will take longer.”

Pakistan is in its 25th IMF programme since independence in 1947, at least 11 of which have been outright bailouts.

The current programme totals around $7 billion over three years, and the IMF agreed this month to release a $1.2 billion tranche.

With global debt levels high, the IMF has used this year’s meetings to urge all economies, including those most exposed to the Iran war shock, to consolidate their finances.

“Fortunately for us, we have been on this fiscal consolidation path for a while,” Aurangzeb said.

He said the government was targeting businesses that collect sales tax from consumers but fail to pass it on to the state, a practice he said cost billions of dollars.

He added that there was “room for improvement” in income tax collection, and that reforms had met resistance from industry, lobby 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.

The privatisation of state-owned assets is a key part of the IMF programme.