Conflict with India won’t have large fiscal impact, says Pakistan finance minister – Firstpost #IndiaFinance

Pakistan’s Finance Minister Muhammad Aurangzeb on Monday said the recent military escalation with arch-rival India won’t have a large fiscal impact on Pakistan and can be managed within the current fiscal space, with no need for a new economic assessment.

In an online interview with ReutersAurangzeb said trade talks with the US — which played a key role in mediating the ceasefire between India and Pakistan — were expected to progress in “short order.”

He added that Pakistan was considering increased imports of high-quality cotton and soybeans, and was also exploring other asset classes, including hydrocarbons.

On Monday, US President Donald Trump said the US is prepared to assist India and Pakistan following their ceasefire agreement, attributing the de-escalation in part to trade pressure, which he claimed played a major role in halting the conflict.

Pakistan currently faces a 29% tariff on exports to the U.S. due to an estimated $3 billion trade surplus, though the tariffs are under a 90-day suspension announced in April.

Meanwhile, the International Monetary Fund (IMF) approved a $1 billion loan disbursement to Pakistan on Friday, as part of a broader $7 billion bailout package.

Aurangzeb confirmed that the tranche would be received on Tuesday.

The IMF executive board also approved a fresh $1.4 billion loan to Pakistan under its climate resilience facility.

The federal budget for the next fiscal year, starting July, will be finalised within the next three to four weeks, with scheduled budget talks with the IMF to take place from May 14-23, he said.

Regarding the India-Pakistan conflict, Aurangzeb described it as a “short duration escalation” with minimal fiscal impact, stating it can be “accommodated within the fiscal space which is available to the government of Pakistan”.

When questioned about potential increased military spending in the upcoming budget, Aurangzeb deferred comment, saying it was premature to discuss specific plans. However, he said: “Whatever we need to do in terms of ensuring that our defence requirements are met will be met.”

Tensions between India and Pakistan began mounting after the April 22 attack in Indian Kashmir on Hindu tourists that killed 26 people, sparking the worst clashes between the nuclear-armed neighbours in more than two decades.

On Saturday a ceasefire in the Himalayan region was announced by Trump, following four days of fighting and diplomacy and pressure from Washington.

With inputs from agencies