Pakistan’s economy is stabilising following key structural reforms, Finance Minister Muhammad Aurangzeb said Monday while presenting the Economic Survey for FY2024–25, projecting FY26 as a potential “turnaround year.”
Aurangzeb outlined improvements in fiscal, monetary, and governance sectors, highlighting reforms in taxation, debt management, and the energy sector that have helped the government steer away from an unsustainable path.
He announced the fiscal deficit contracted to 2.6% of GDP, down from 3.7% last year, while the primary surplus rose to 3.0% from 1.5%. Tax revenues surged 26.3%, reaching Rs9.3 trillion for July–April FY25.
“A very big primary surplus has been achieved through reduced government expenditure and increased revenues,” Aurangzeb said. He added debt servicing costs have dropped by half this fiscal year, with savings nearing Rs1 trillion, and expects policy rates to decline further.
The finance minister stressed the government has achieved macroeconomic stability and must stay the course. “This has to be on the back of the macroeconomic agenda we have already achieved. The moment we go into consumption-led growth, the entire discussion gets derailed,” he said.
Aurangzeb said the Planning Ministry has been informed of expected GDP growth rising from 2.7% to 4.2%, and survey results shared with investors to underline the stability achieved. He acknowledged inflation remains a challenge but expects improvement.
He pointed to improved governance in power distribution companies, with private sector professionals driving “remarkable recoveries” despite ongoing system losses. “We are going to end circular debt and stop the bleeding,” he affirmed.
Pakistan’s external account recorded a $1.9 billion surplus during July–April FY25, driven by strong IT export growth. Remittances are projected at $37–38 billion by year-end, up from $27 billion two years ago. The government is no longer a “desperate borrower,” with foreign exchange reserves at $16.64 billion as of May 27, including $11.5 billion held by the State Bank. Fitch Ratings upgraded Pakistan’s sovereign rating from CCC+ to B– with a stable outlook.
Revenue mobilisation efforts doubled individual tax filers, and Rs2.4 trillion in treasury bills were retired in FY25, aided by Rs610 billion raised via a new two-year zero-coupon bond. The average maturity of domestic debt extended from 2.9 to 3.5 years. The KSE-100 index posted a 50% return, gaining 78,000 points, reflecting renewed investor confidence.
Aurangzeb said banks must support fiscal discipline by reducing government borrowing. “It will be a fair deal in terms of markup rates when the government borrows from banks. We will float long-term bonds in the future.”
Sectoral performance was mixed. Agriculture grew 0.56% due to lower crop output, though rice exports improved. Issues like limited storage and poor farmer financing remain, with efforts underway to reduce middlemen and improve market access. Construction expanded 6.6%, services 2.9%, while large-scale manufacturing showed signs of stabilisation despite weak output.
Electricity generation capacity reached 46,605 MW, with 55.7% thermal and 24.4% hydropower. Total consumption was 80,111 GWh, nearly half used by households. Petroleum demand rose 7% in July–March, with transport accounting for 80%.
Aurangzeb highlighted climate initiatives including the $77 million Recharge Pakistan Project, the launch of the first Carbon Market Policy at COP29, and a Climate Budget Tagging system covering over 5,000 federal cost centres.
He confirmed the IMF approved an additional $1.4 billion under the Resilience and Sustainability Facility (RSF), acknowledging progress under the Extended Fund Facility (EFF). Aurangzeb stressed, “We have significant financing” but the challenge is utilising funds effectively.
The Benazir Income Support Programme disbursed Rs593 billion in FY25 for vulnerable households. Aurangzeb said, “We need to first stop the bleeding and then address legacy issues,” reiterating the government’s commitment to sustained reforms and growth-focused policies.
He announced Pakistan’s first Sovereign Domestic Green Sukuk worth Rs30 billion to finance climate-resilient and renewable energy projects, part of efforts to deepen the domestic capital market.
GDP reached Rs114,692 billion (US$411 billion), up 9.1%, with per capita income rising to $1,824. Inflation eased, with the GDP deflator at 4%, the lowest since FY2018. Remittances and a decline in the Karachi Interbank Offered Rate (KIBOR) to around 11% signal improving macroeconomic health.
Aurangzeb defended the government’s role in fostering job creation through an enabling environment, especially for freelancers: “The government’s job is to provide an ecosystem, not the jobs.”
On governance and data, he stressed automation and analytics to improve official statistics. “Data analytics has a very important place,” he said. “We will sit together to bring about improvements.”
The finance minister noted a 40% increase in the auto sector and a 2% rise in textiles, with increased machinery imports reflecting productive investment.
Regarding demographic challenges, Aurangzeb said Pakistan’s population grows at 2.5% annually and warned that if it reaches 300 to 400 million, strategies must be devised to tackle the issue. The upcoming NFC Award meeting aims to address delinking development funding from population growth, which Aurangzeb called an “existential problem.”
The government’s overall development budget for the next year is about Rs4.2 trillion, focusing on strategic projects like dams and roads, while social projects are to be managed by provinces.
Aurangzeb highlighted the country partnership framework with $20 million financing, one-third earmarked for climate resilience, saying, “The financing is available — it is time to go towards execution.”
He concluded, “Structural reforms will continue to achieve sustainable growth. Macroeconomic stability is a means to an end — now we move toward sustainable growth,” adding that national optimism is at a six-year high.
