Economic survey

The major theme used to describe Pakistan’s economic journey over FY2024-25 has been ‘stabilisation’. The release of the Pakistan Economic Survey 2024-25 on Monday, the flagship annual publication of the Ministry of Finance, brought further confirmation of this trend. The survey holds significance ahead of the annual federal budget – set to be tabled in the National Assembly today – offering detailed insights into the country’s socio-economic performance in the outgoing fiscal year. According to the survey, GDP growth increased slightly from 2.5 per cent last fiscal year to 2.68 per cent for the current fiscal and inflation came in at 4.7 per cent over the first ten months of FY2024-25 against 26 per cent during the same period in the previous fiscal. Greater price stability has been accompanied by a stronger debt profile, with an extension in the Average Time to Maturity (ATM) of domestic debt from 2.9 years to 3.5 years, indicating a reduction in refinancing risks. Record growth in foreign remittances and tech exports also helped keep the external account in safe territory, with the current account recording an unprecedented surplus of $1.9 billion during the July 2024 to April 2025 period. Foreign exchange reserves rose to $16.64 billion as of May 27, 2025 from $14.31 billion on the same date last year. On the fiscal front, the government achieved a surplus during the first quarter of the current fiscal for the first time in 24 years.

Inflation, fiscal responsibility, a current account that is in the green and manageable refinancing risks are all things Pakistan has struggled to achieve over the last few decades. That these achievements have come as a package underscores the fact that they are interlinked and that any relapse on any one of these fronts will jeopardise the others as well. With that in mind, the government deserves full credit for carrying out an extensive stabilisation act and pulling the economy back from the brink of default, where the current administration had found it. The IMF, under the first review of the EFF, has acknowledged Pakistan’s significant improvements in economic and fiscal indicators, noting evident progress in stabilising the economy and rebuilding confidence. Winning the confidence of the IMF has been no easy task and retaining it will not be any easier. The progress on the fiscal front, in particular, may well not have been possible without the brutal hikes in utility tariffs and taxes on the salaried classes that the nation has had to endure. Balancing the IMF’s vote of approval with that of the actual voters will arguably be the major challenge going forward.

In this respect, the struggle with growth is a major worry going forward. Analysts have noted that the 2.68 per cent growth rate is less than the government’s initial target of 3.6 per cent and some believe it may even be revised downwards. The trend in agriculture, which accounts for over a third of national employment and almost a quarter of the GDP, is especially worrying. The sector recorded growth of just 0.56 per cent, against 6.4 per cent in the previous fiscal, with services emerging as the main engine of growth and expanding by 2.91 per cent. And while the industrial sector reversed its contraction in FY2023-24, growing by 4.77 per cent, some analysts believe that this figure may be revised downwards. Turning growth around is key to reviving the people’s confidence in the country’s economic direction. The salaried classes need more job opportunities and better pay if they are going to withstand fiscal consolidation and other structural reforms.