Key points
- Pakistan’s GDP grew by 2.68pc in FY 2024-25
- Inflation dropped sharply to 4.7pc
- Agriculture sector lagged with a modest 0.56pc growth
- Record remittances of $31.2bn helped swing current account to a US$ 1.9 billion surplus
- Fiscal consolidation gained traction, with first quarterly surplus in 24 years
- IT exports surged to $2.83bn
ISLAMABAD: Pakistan’s economy showed encouraging signs of stabilisation and recovery in FY 2024-25, with real gross domestic product (GDP) expanding by 2.68 per cent, according to the Annual Economic Survey unveiled on Monday by Finance Minister Muhammad Aurangzeb.
This growth in GDP is well below the target of 3.56 per cent set earlier. This, however, will be a slight improvement from last year’s 2.5 per cent. Moreover, it is below the five-year average of around 3.3 per cent, and well short of Pakistan’s long-term average of over 4.5 per cent.
This fiscal year, the size of Pakistan’s economy has seen a growth from $372 billion to $411 billion.
The finance minister was of the opinion that the fall in the inflation rate in Pakistan needs to be seen in the global context. He pointed out that global inflation stood at 2.6 per cent in 2023, rose to 2.7 per cent in 2024, and is projected to reach 3.1 per cent in 2025.
Aurangzeb underscored that, in contrast, inflation in Pakistan had fallen from 29 per cent in 2023 to 23 per cent in 2024, and now to a six-decade low of 4.6 per cent.
Proposed changes in resource-sharing formula
The finance minister, while launching the Economic Survey of Pakistan 2024-25, also suggested a major revision to the National Finance Commission (NFC) resource-sharing formula, which determines allocation of resources among the federation and the provinces.
He proposed reducing the dominant weightage of population – currently 82 per cent – in favour of other indicators such as area, poverty, and revenue generation, which together carry a weightage of 18 per cent. Speaking in favour of his proposal, Aurangzeb argued that the existing formula incentivises population growth at the expense of equity.
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 per cent CPI—a steep descent from 17.3 per cent a year earlier.
The average inflation rate during July–April stood at 4.7 per cent, significantly down from 26 per cent last year.
In response, the State Bank of Pakistan slashed its policy rate to 11 per cent, signalling a return to monetary stability.
Fiscal resilience and revenue growth
For the first time in 24 years, Pakistan posted a fiscal surplus in Q1 FY2025.
The fiscal deficit narrowed to 2.6 per cent of GDP, while the primary surplus surged to 3.0 per cent, bolstered by a 36.7 per cent rise in total revenues and robust tax collections.
The Federal Board of Revenue (FBR) collected Rs10.23 trillion, a nearly 26 per cent increase, and provincial surpluses more than doubled to Rs1.05 trillion.
Per capita income rises to US$ 1,824
Nominal GDP increased by 9.1 per cent to Rs114,692 billion, while per capita income rose to $1,824, a 9.7 per cent increase year-on-year, aided by stable exchange rates and higher economic activity.
The investment-to-GDP ratio rose to 13.8 per cent from 13.1 per cent, and the savings rate improved to 14.1 per cent, reflecting strengthened domestic resource mobilisation.
Investor optimism and market rally
Investor sentiment was buoyed by economic stabilisation, with the KSE-100 index soaring 50.2 per cent and market capitalisation climbing to Rs14.37 trillion.
The incorporation of 26,104 new companies, particularly in IT and services, signalled revived business confidence.
External sector improves
Pakistan recorded a current account surplus of US$ 1.9 billion, fueled by a record $31.2 billion in remittances, up 31 per cent year-on-year.
However, the trade deficit widened to $21.3 billion, reflecting a faster growth in imports than exports.
Agricultural sector falters
Agriculture posted a modest 0.56 per cent growth, driven almost solely by livestock (4.72 per cent), while major crops declined by 13.49 per cent due to weather disruptions and shrinking cultivation.
The output of key staples such as cotton (-30.7 per cent), maize (-15.4 per cent), and wheat (-8.9 per cent) fell sharply, underlining vulnerabilities in food security.
Education inequality and dropouts
Pakistan’s literacy rate rose to 60.65 per cent, yet 38 per cent of children remain out of school.
Regional disparities are stark—Balochistan reports a dropout rate of 69 per cent, 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 Rs30 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 per cent, led by automobiles (40 per cent) and apparel (7.6 per cent), though Large-Scale Manufacturing contracted 1.5 per cent over nine months.
- Services, the backbone of GDP (58.4 per cent), grew at 2.91 per cent, offering stability but lagging behind potential.
- IT and ITeS exports reached $2.83 billion, posting a 23.7 per cent growth, while freelancers contributed $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 per cent to the 46,605MW installed capacity, alongside increased reliance on nuclear power (7.8 per cent).
-
Human development and social protection
Pakistan expanded its social safety net, with the Benazir Income Support Programme (BISP) disbursing Rs385.6 billion to 9.9 million beneficiaries.
Microfinance also surged, with 12.3 million active borrowers and savings climbing to Rs700 billion—an 87 per cent rise since 2021.
Notably, 68 per cent of microloans went to women, enhancing financial inclusion.
In health, federal spending rose to Rs924.9 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 Rs76 trillion, with domestic and external debt comprising Rs51.5 trillion and Rs24.5 trillion, respectively.
The government pursued active debt management—retiring Rs2.4 trillion in T-Bills and launching new instruments like zero-coupon PIBs and a 10-year Sukuk.
The above statistics; however, show that the major drivers of growth i.e. agriculture and the big industry, would continue to face challenges. The scenario appears to see little change, given agricultural growth has hit a nine-year low and large-scale manufacturing is contracting.
Staying realistic, Pakistan’s finance minister was quick to warn against a “sugar rush” for faster growth, adding the last thing the country needs is more boom-and-bust cycles.
Experts of the view that the lower fiscal deficit is not because of a broadening of the tax net and an increase in exports rather it was achieved by a decrease in the development budget, which itself will continue to hamper future growth. It is expected to remain much lower than last year’s 6.8 per cent, they added.
Similarly, a nine per cent increase in per capita income to $1,824 does not necessarily reflect an across-the-board increase in income.
Economists are of the opinion that this fundamentally reflects a widening income disparity in society, especially when the number of those pushed below the poverty line has significantly shot up.
Glimmer of hope
Despite lingering risks—including low agricultural 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.
