The finance ministry’s economic update paints a cautiously optimistic picture, touting recovery in select sectors and a cooling inflation rate as signs of stability.

It’s the kind of report that wants you to focus on the glass half full—fiscal discipline is paying off, deficits are shrinking, and a few industries are showing sparks of life. But scratch the surface, and the optimism feels brittle. Growth is stuck below 2 percent, barely keeping pace with the population, while job-heavy sectors like manufacturing, agriculture, and construction are languishing.

The central bank’s reserves are down $1 billion in two months, signaling cracks in the balance of payments. Taxes are squeezing salaried workers and formal businesses dry, yet efforts to broaden the tax base are flopping. Meanwhile, farmers are reeling from low crop yields and prices, dragging down demand across the board. This report, meant to chart a path to sustainable growth, seems more focused on short-term wins than tackling the deeper issues holding Pakistan back. It’s a snapshot of an economy teetering between hope and hardship, where the numbers tell a story that’s harder to spin.

The report tries to sell a story of economic recovery, spotlighting a few bright spots and cheering for steady inflation. But honestly, it feels like they’re glossing over the rough bits. The truth? Growth is limping along at under 2 percent. Key job-creating sectors like manufacturing, agriculture (outside of livestock), and construction are stuck in a rut. It’s tough to feel optimistic when the engines of employment are sputtering. Then there’s the balance of payments mess. Sure, the current account looks okay on paper, but the State Bank of Pakistan’s reserves have taken a $1 billion hit in just two months. That’s not exactly the kind of news that inspires confidence.

The ministry’s main gig is steering the fiscal ship toward long-term growth, but this report feels like it’s fixated on quick wins. The fiscal deficit is down to 1.7 percent of GDP for July-January FY25, better than last year’s 2.6 percent. And the primary surplus? It jumped to Rs 3.6 trillion (2.8% of GDP) from Rs 1.9 trillion (1.8% of GDP). Not bad, right?

But dig deeper, and it’s clear this progress comes from leaning hard on last year’s central bank profits and jacking up taxes on salaried workers and formal businesses. Meanwhile, efforts to widen the tax net—like the Tajir Dost Scheme—have barely made a dent. Agriculture and real estate taxes? Still stuck in neutral.

Spending’s another sore point. Overall, it’s up 17 percent, with debt interest payments climbing 20 percent. Other spending grew just 11 percent, mostly because subsidies got slashed thanks to lower global commodity prices. It’s a mixed bag—less debt and a tighter current account deficit are wins, but squeezing the formal sector this hard is choking growth and scaring off investment.

On the bright side, inflation’s genuinely cooling off, thanks to the central bank’s tight grip last year and taxes that’ve crushed demand. Falling global food and energy prices helped, too. But there’s a catch: farmers are hurting. Major crops tanked, and low farm incomes are dragging down demand for everything else. Core inflation’s still stubborn, though, with health, clothing, and education costs rising fast.

Manufacturing is a mixed bag. Some sectors—like textiles and apparel—are inching up, mostly for exports. Tobacco is doing better, too, thanks to tighter tax enforcement. But overall, large-scale manufacturing dipped 1.8 percent in the first seven months of FY25, and most sectors haven’t touched their 2022 highs.

Looking ahead, the economy might nudge up to 2-2.5 percent growth for the year, better than the first half’s 1.7 percent. But that’s still slower than population growth, so it’s not like we’re gaining ground. Worse, any pickup could strain the current account, stall reserve growth, and maybe even spark inflation again. All in all, it’s a tough road. The report tries to put a brave face on things, but the numbers tell a story of an economy that’s struggling to find its footing.

Pakistan’s economic journey in March 2025 feels like a tightrope walk—some steps forward, but plenty of wobbles. The report celebrates fiscal gains and lower inflation, and those are real achievements. A leaner deficit and a stronger primary surplus show discipline, while cooling prices offer relief to consumers battered by years of hikes. Yet, the bigger picture is sobering. Growth is too slow to lift living standards, and key sectors employing millions are stuck in reverse. Tax policies are choking the formal economy, and without a wider tax net, the burden stays unfair.

Falling farm incomes and sticky core inflation hint at deeper troubles brewing. The risk of a strained current account looms, threatening to unravel hard-won stability. This isn’t a crisis, but it is far from a success story. Pakistan needs bold moves—reforms to spark investment, support for struggling farmers, and a tax system that doesn’t punish growth. For now, the economy’s holding on, but it is a fragile grip. The path ahead demands more than cautious optimism; it calls for courage to confront the structural flaws and build a foundation for prosperity that lasts.