Attacks on Gulf energy infrastructure ‘worrying’ for outlook, says FM Aurangzeb

ISLAMABAD: Finance Minister Muhammad Aurangzeb said on Saturday Pakistan had so far been able to weather the shock from the soaring oil costs due to the Iran war but attacks on infrastructure in Saudi Arabia and other Gulf countries were “worrying” for the country’s longer-term economic prospects.

“We have enough energy supplies for November and we are preparing for the winter months when the demand of households goes up,” Aurangzeb told AFP on the sidelines of the IMF-World Bank Annual Meetings in Bangkok.“Pakistan has negotiated well the first order impact,” he remarked.”We have 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 said.

“The government would not be procuring spot cargoes on the LNG front unless it saw an absolute dire need,” he said. These are often much more expensive than contracted cargoes.

Since the United States and ally Israel began the war on Iran in February, global energy prices have skyrocketed, with Tehran’s retaliatory action against Washington’s Gulf allies, and curbing supply of oil and gas.

And with Yemen’s civil conflict flaring up again, the Houthis there have frequently assaulted Saudi infrastructure like energy installations and airports in recent days.

“Damage to such sites will only prolong the restoration to economic normalcy,” Aurangzeb said. “I am alarmed about the escalation.“The scary part of it is when the energy infrastructure starts getting hit now,” he warned.To be very honest I don’t know where that would go. But one thing is very clear: if the infrastructure continues to get hammered, the return to normalcy, even if things subside, will be longer,” he said.Pushback

Pakistan is a regular customer of the International Monetary Fund (IMF), the lender of last resort to countries teetering on default.

Since independence in 1947, it is now in the middle of its 25th program with the Fund – at least 11 of which have been full-fledged bailouts.

The present program is worth about $7 billion over three years and the Fund agreed last month to disburse a $1.2 billion tranche.

The Fund urged on all economies, even those most vulnerable to the shock of the Iran conflict, to engage in fiscal consolidation at this year’s annual meetings to avoid a possible crisis given the high levels of global debt stocks. ““We have been on this fiscal consolidation path for a while, thankfully for us,” Aurangzeb added with rueful smile.

In recent years tax revenues of the country have expanded considerably and the finance minister indicated that the government was targeting the theft of taxes by private sector enterprises who collected sales tax from consumers but never paid it into government accounts.

The theft was in the billions of dollars, Aurangzeb said, adding that there was “room for improvement” in strengthening income tax collection.

He claimed industry, lobbying groups and vested interests had resisted the government’s reform agenda.“Every reform, every thing you try to do when you try to change the status quo, there is pushback,” he said.