Ahead of Budget FY26: Here’s What the Economic Survey Tells Us
News Desk
Islamabad: The Economic Survey 2024-25, released ahead of Pakistan’s federal budget due Tuesday, paints a cautiously optimistic picture of a stabilising economy under the ongoing $7 billion International Monetary Fund (IMF) programme. Despite signs of recovery, structural vulnerabilities and external risks continue to challenge sustained growth.
According to the survey, Pakistan’s economy grew by 2.68% in FY25, indicating modest recovery amid tighter fiscal and monetary conditions. The country’s Gross Domestic Product (GDP) at current prices rose by 9.1% to Rs114.69 trillion, while per capita income increased by 9.7% to $1,824.
Inflation showed a dramatic decline, with headline Consumer Price Index (CPI) at just 0.3% in April 2025, down from 17.3% a year earlier. Average inflation for the July–April FY25 period stood at 4.7%, compared to a staggering 26% in the same period last year, aided by easing energy and food prices.
The investment-to-GDP ratio improved to 13.8%, while the saving-to-GDP ratio rose to 14.1%, reflecting renewed confidence in the economy.
Sectoral Performance
The agricultural sector recorded marginal growth of 0.56% during FY25, primarily driven by a 4.72% rise in livestock. However, major crops witnessed a sharp contraction of 13.49%, affected by lower cultivation levels and adverse weather conditions.
Industrial output expanded by 4.77%, led by small-scale manufacturing and the meat processing sector. Large-scale manufacturing, however, remained under pressure, contracting by 1.5% due to high input costs and supply chain disruptions.
The services sector, which continues to dominate the economy with a 58.4% share in GDP, grew by 2.91%. Key drivers included retail trade, transport, and government services.
Fiscal & Monetary Indicators
In a historic development, Pakistan recorded a fiscal surplus of Rs1,896 billion (1.7% of GDP) in the first quarter of FY25 — the first in over two decades. The full-year fiscal deficit narrowed to 2.6% of GDP, while the primary surplus stood at 3.0%, reflecting improved revenue generation and controlled spending.
The State Bank of Pakistan (SBP) cut the policy rate to 11% in May 2025, down from a peak of 22%, citing falling inflation and improved macroeconomic indicators.
Broad Money (M2) grew by 4.5% during July–March FY25, compared to 7.2% in the same period last year. Private sector credit surged to Rs767.6 billion, nearly three times higher than the previous year, while consumer financing rose by Rs71.4 billion.
Capital Markets & External Sector
The Pakistan Stock Exchange saw a significant rally, with the benchmark KSE-100 index gaining 50.2% and closing at 117,807 points in March 2025. The surge was driven by stable macroeconomic conditions, strong corporate earnings, and confidence in the IMF-backed reform agenda.
On the external front, the current account posted a surplus of $1.9 billion during July–April FY25, reversing a $1.3 billion deficit last year. Foreign exchange reserves improved to $16.64 billion by May 2025.
Worker remittances surged by 31% year-on-year, reaching $31.2 billion during July–April FY25, with a record monthly inflow of $4.1 billion in March.
Debt and Fiscal Management
Total public debt stood at Rs76 trillion by end-March 2025, with domestic debt at Rs51.5 trillion and external debt at Rs24.5 trillion (approximately $87 billion). The government retired Rs2.4 trillion in Treasury Bills to reduce short-term debt exposure and introduced new instruments, including a two-year zero-coupon Pakistan Investment Bond and a one-month Treasury Bill.
Strategic liability management operations included buybacks and exchanges of nearly Rs1 trillion in government securities to ease debt servicing pressures.
Pakistan also launched its first Green Sukuk worth Rs30 billion, marking a milestone in the country’s push for green finance and climate-aligned investment.
Climate & Reform Agenda
Pakistan secured $1.4 billion under the IMF’s Resilience and Sustainability Facility (RSF) to enhance climate resilience and has institutionalised a climate budgeting framework. These steps are part of broader reforms under the government’s “URAAN Pakistan” transformation strategy.
Economic Outlook
Looking ahead, the government expects the economy to grow at its potential in FY26, with medium-term growth projected at 5.7%, supported by ongoing reforms and macroeconomic stability.
Inflation is forecast to remain within the 5–7% range, while the current account deficit is projected to stay at a manageable 0.8% of GDP. Growth in IT exports, remittances, and lower energy imports will support external stability.
The government is also focusing on export diversification, regional trade integration, and domestic value chains to reduce vulnerability to external shocks.
Fiscal consolidation efforts continue through tax base expansion, energy sector reforms, and privatisation initiatives aimed at improving long-term fiscal sustainability.
Risks and Challenges
Despite improvements, the survey highlights persistent risks. Slowing global trade, higher risk premiums, and restrictive immigration policies in Gulf countries may affect remittance flows, exports, and investment sentiment.
The report also warns of possible return migration and a tightening global job market, urging the need for enhanced domestic labour absorption policies to safeguard livelihoods.
With the upcoming federal budget, all eyes are now on how the government will align fiscal priorities with growth targets, investor confidence, and commitments under the IMF programme.
Input from Geo News Website.
