ISLAMABAD: In a bold presentation ahead of the federal budget, Finance Minister Muhammad Aurangzeb unveiled the Pakistan Economic Survey 2024-25 on Monday, projecting an ambitious GDP growth of 2.7% for the outgoing fiscal year — a target that hinges on an unlikely economic surge in the final quarter.
While the government maintains confidence in a slow but steady recovery, numbers reveal a mixed reality. The National Accounts Committee reported GDP growth of just 1.37% in Q1, 1.53% in Q2, and 2.4% in Q3, implying the economy would need to achieve a steep 5.5% growth in the April-June quarter to meet the full-year target — a feat experts say is overly optimistic.
Despite missing its growth targets for the third consecutive year (this year’s target was 3.6%), Aurangzeb remained unfazed. “These are government estimates — and we will go with what the government has provided,” he asserted, brushing off skepticism during a press conference in Islamabad.
Inflation: From crisis to “fantastic story”
Perhaps the most celebrated turnaround came on the inflation front. Aurangzeb called it a “fantastic story”, noting that the Consumer Price Index (CPI) dropped sharply from a staggering 29% in 2023 to just 4.6%, outpacing even global improvements.
“This is the right direction,” he declared, suggesting inflation control was the linchpin of economic credibility both at home and abroad.
Sectoral snapshot: Agriculture resilient, industry rebounding, services stable
- Agriculture, accounting for 23.5% of GDP, remained a lifeline, growing 0.56% despite climatic shocks. Livestock surged 4.72%, while key crops shrank by 13.49%, pointing to climate vulnerability and outdated sowing patterns.
- Industrial growth rebounded to 4.8%, following a contraction of -1.4% last year. However, large-scale manufacturing remained under stress.
- Construction grew 6.6%, and autos surged 40%, but sectors like chemicals and steel declined — signaling uneven recovery.
- The services sector expanded by 2.9%, with ICT showing strong momentum at 6.5%.
Debt, deficits, and discipline: Fiscal tightrope act
Pakistan posted a fiscal deficit of 2.6% of GDP in the first nine months of FY25 — down from 3.7% the previous year. The primary surplus hit 3%, indicating tighter fiscal control.
Public debt-to-GDP ratio dropped slightly to 65%, and foreign reserves climbed to $9.4 billion from a dangerous low in 2023. “It’s a remarkable recovery,” the finance minister said.
Aurangzeb highlighted an Rs800 billion saving in debt servicing due to falling interest rates, now down from 22% to 11%. “We are no longer desperate borrowers,” he said, adding that this sends a powerful signal to banks to prioritize the private sector.
IMF, reforms, and structural shifts
The minister reaffirmed Pakistan’s intention to pursue an Extended Fund Facility (EFF) with the IMF, not for survival, but for what he termed a “DNA reset” of the economy. He emphasized the need for structural reforms, ranging from SOE privatization to pension revamps and digital governance.
“Transformation takes two to three years. We’ve laid the foundation — now it’s about execution,” Aurangzeb noted.
Revenue boom and RDA surge
Tax collection rose 26.3% year-on-year, hitting Rs9.3 trillion by April, with the FBR targeting Rs12.97 trillion by year-end. Aurangzeb credited this to tech-led enforcement, AI audits, and digital invoicing.
Roshan Digital Account (RDA) inflows crossed $10 billion, and remittances surged 31%, reaching a record $4.1 billion in March — bringing full-year expectations to $37–38 billion.
Social sector and green commitments
Rs593 billion were disbursed via the Benazir Income Support Programme, assisting 10 million families. On the climate front, Aurangzeb highlighted Pakistan’s National Climate Finance Strategy, and upcoming Green Sukuk projects aimed at decarbonization.
Confidence rising – But is it sustainable?
Quoting multiple surveys, the minister said investor confidence is at a six-year high. PwC reported 83% CEO optimism, while Gallup cited a 27.5% rise in household affordability in one quarter.
Still, challenges loom. Poverty, according to a World Bank report, touches 45% of Pakistan’s population — a figure the minister questioned, citing shifting global metrics.
The GDP growth target for FY26 has been set at 4.2%, and the government hopes to build on recent momentum. But the burden remains heavy: circular debt, SOE losses, structural inefficiencies, and global headwinds.
“We’ve stopped the bleeding — now we must treat the wound,” Aurangzeb concluded.
