Finance Minister Aurangzeb Dismisses Economic Impact of Pak-India Skirmish

Pakistan Strikes Key Indian Military Sites in Response to Air Raids

By DTD- On May 13, 2025

Islamabad — Federal Finance Minister Muhammad Aurangzeb has dismissed concerns about the economic fallout from the recent military skirmish with India, calling the impact “minor” and manageable within Pakistan’s current fiscal framework.

In an interview with Reuters, the finance minister asserted that Pakistan’s economy remains resilient despite heightened tensions along the Line of Control (LoC), which escalated following the April 22 attack in Indian-occupied Pahalgam that killed 26 people. India blamed Pakistan for the incident without presenting evidence, a claim strongly rejected by Islamabad.

“The financial impact of the skirmish is not significant. It can be absorbed within the fiscal space available,” said Aurangzeb, emphasizing that national defense would continue to be prioritized without compromising economic goals. However, he declined to speculate on whether defense spending would increase in the upcoming federal budget.

Tensions between the two nuclear-armed neighbors peaked with Pakistan’s launch of Operation Bunyan-un-Marsus on May 10 in response to Indian air strikes. According to military sources, Pakistan targeted key Indian military installations, including airbases at Pathankot and Adampur, a Brahmos missile depot, and an S-400 air defense system. Pakistan’s forces reportedly downed five Indian aircraft and struck several brigade-level command centers.

A ceasefire agreement was reached soon after, with U.S. President Donald Trump playing a mediating role. Trump cited trade as a key factor behind the rapid de-escalation and reaffirmed America’s commitment to fostering peace in the region.

Aurangzeb welcomed Washington’s role and expressed optimism about strengthening economic ties with the U.S. “We are hopeful that trade discussions with the United States will conclude soon,” he said, noting Pakistan’s interest in importing U.S. cotton, soybeans, hydrocarbons, and other essential commodities.

The minister also addressed India’s suspension of the Indus Waters Treaty, calling it a dangerous precedent. “Water must not be used as a weapon. The Indus River is vital to our economy and agriculture,” he stated.

IMF Approves Tranche, Climate Loan in Pipeline

Aurangzeb confirmed that the International Monetary Fund (IMF) had approved a $1 billion tranche under Pakistan’s ongoing $7 billion bailout program. The funds are expected to arrive in Islamabad by Tuesday.

Additionally, the IMF executive board has greenlit a new $1.4 billion loan aimed at boosting Pakistan’s climate resilience.

Regarding the upcoming budget, Aurangzeb said it would be finalized within the next three to four weeks, with budget negotiations with the IMF scheduled from May 14 to 23.

Currently, Pakistani exports to the U.S. are subject to a 29% tariff due to a $3 billion trade surplus. However, the implementation of this tariff has been suspended for 90 days, providing temporary relief to exporters.

Analysts say Aurangzeb’s calm posture and focus on trade and fiscal stability signal Pakistan’s intent to shield its economy from external shocks while navigating geopolitical tensions with strategic restraint.