KEY POINTS
- Pakistan’s GDP grew by 2.68 percent in FY 2024-25
- Inflation dropped sharply to 4.7 percent
- Agriculture sector lagged with a modest 0.56 percent growth
- Record remittances of US$ 31.2 billion helped swing the current account to a US$ 1.9 billion surplus
- Fiscal consolidation gained traction, with the first quarterly surplus in 24 years
- IT exports surged to US$ 2.83 billion
- Social protection and climate finance saw major boosts
ISLAMABAD: Pakistan’s economy showed encouraging signs of stabilization and recovery in FY2024-25, with real GDP expanding by 2.68 percent, according to the Annual Economic Survey unveiled on Monday by Finance Minister Muhammad Aurangzeb.
The report paints a cautiously optimistic picture, balancing notable progress in macroeconomic management with persistent structural challenges—especially in agriculture, education, and climate resilience.
Turnaround in Inflation and Monetary Policy
One of the standout achievements was the dramatic drop in inflation, with April 2025 registering a historic 0.3 percent CPI—a steep descent from 17.3 percent a year earlier.
The average inflation rate during July–April stood at 4.7 percent, significantly down from 26 percent last year.
In response, the State Bank of Pakistan slashed its policy rate to 11 percent, signalling a return to monetary stability.
Fiscal Resilience and Revenue Growth
For the first time in 24 years, Pakistan posted a fiscal surplus in Q1FY2025.
The fiscal deficit narrowed to 2.6 percent of GDP, while the primary surplus surged to 3.0 percent, bolstered by a 36.7 percent rise in total revenues and robust tax collections.
The Federal Board of Revenue (FBR) collected Rs 10.23 trillion, a nearly 26 percent increase, and provincial surpluses more than doubled to Rs 1.05 trillion.
Per Capita Income rises to US$ 1,824
Nominal GDP increased by 9.1 percent to Rs 114,692 billion, while per capita income rose to US$1,824, a 9.7 percent increase year-on-year, aided by stable exchange rates and higher economic activity.
The investment-to-GDP ratio rose to 13.8 percent from 13.1 percent, and the savings rate improved to 14.1 percent, reflecting strengthened domestic resource mobilization.
Investor Optimism and Market Rally
Investor sentiment was buoyed by economic stabilization, with the KSE-100 index soaring 50.2 percent and market capitalization climbing to Rs 14.37 trillion.
The incorporation of 26,104 new companies, particularly in IT and services, signalled revived business confidence.
External Sector Improves
Pakistan recorded a current account surplus of US$ 1.9 billion, fueled by a record US$ 31.2 billion in remittances, up 31 percent year-on-year.
However, the trade deficit widened to US$ 21.3 billion, reflecting a faster growth in imports than exports.
Agricultural Sector Falters
Agriculture posted a modest 0.56 percent growth, driven almost solely by livestock (4.72 percent), while major crops declined by 13.49 percent due to weather disruptions and shrinking cultivation.
The output of key staples like cotton (-30.7 percent), maize (-15.4 percent), and wheat (-8.9percent) fell sharply, underlining vulnerabilities in food security.
Education Inequality and Dropouts
Pakistan’s literacy rate rose to 60.65 percent, yet 38 percent of children remain out of school.
Regional disparities are stark—Balochistan reports a dropout rate of 69 percent, while urban areas far outperform rural regions in literacy.
Despite increased spending and digital upgrades in universities, foundational access and gender gaps remain significant.
Climate Change and Environmental Stress
Pakistan experienced its ninth warmest year in six decades in 2024. In response, the government launched key green finance initiatives, including the first Green Sukuk worth Rs 30 billion and Carbon Market Policy announced at COP29. Yet, the climate crisis looms large, demanding sustained global support and institutional reforms.
Sectoral Snapshot: Mixed Performance Across the Board
- Industry grew by 4.77 percent, led by automobiles (40 percent) and apparel (7.6 percent), though Large-Scale Manufacturing contracted 1.5 percent over nine months.
- Services, the backbone of GDP (58.4 percent), grew at 2.91 percent, offering stability but lagging behind potential.
- IT & ITeS exports reached US$ 2.83 billion, posting a 23.7 percent growth, while freelancers contributed US$ 400 million.
- Transport and infrastructure saw gains, with Pakistan International Airlines returning to operating profit and road networks expanding, though shipping sector earnings declined.
- Energy mix showed diversification with renewables now contributing 12.5 percent to the 46,605 MW installed capacity, alongside increased reliance on nuclear power (7.8 percent).
Human Development and Social Protection: Expanding the Welfare Net
Pakistan expanded its social safety net, with the Benazir Income Support Programme disbursing Rs 385.6 billion to 9.9 million beneficiaries.
Microfinance also surged, with 12.3 million active borrowers and savings climbing to Rs 700 billion—an 87 percent rise since 2021.
Notably, 68 percent of microloans went to women, enhancing financial inclusion.
In health, federal spending rose to Rs 924.9 billion, and cancer care expanded through Atomic Energy Commission hospitals.
Youth development remained a strategic focus, with 56,000 trained under the PM Youth Skill Development Programme, and 727,000 workers registered for overseas employment.
Debt, Reforms, and Outlook
Public debt stood at Rs 76 trillion, with domestic and external debt comprising Rs 51.5 trillion and Rs 24.5 trillion, respectively.
The government pursued active debt management—retiring Rs 2.4 trillion in T-Bills and launching new instruments like zero-coupon PIBs and a 10-year Sukuk.
Despite lingering risks—including low agriculture productivity, underinvestment in human capital, and exposure to climate shocks—the FY2025 Economic Survey provides a glimmer of hope.
The emphasis on structural reforms, digital transformation, and fiscal consolidation suggests that Pakistan may be on a path to sustainable recovery—if momentum is maintained.
