Pakistan’s landscape is riddled with financial strain, questionable development priorities, and growing exposure to external shocks.
A net financial outflow of $1.6 billion due to mounting debt repayments, combined with rising expenditure and stagnant development disbursements, underscores the fragile state of the country’s fiscal health. Despite temporary relief from inflation and global support for climate initiatives, the government’s reliance on indirect taxation and underinvestment in social sectors continues to raise serious concerns.
Pakistan’s economic momentum languishes in the shadow of its regional contemporaries. In contrast to the nation’s modest 2.68% growth expectation for FY 2024-25, the economic engines of neighboring states have revved with far greater force—India forecasted at a brisk 6.5%, China cruising at 5%, Sri Lanka pacing similarly, and Bangladesh clocking in at 4.2%. Though Pakistan’s figure has already been dialed down from a more ambitious 3.5%, even attaining this tempered benchmark appears Sisyphean, given the sluggish showing across previous quarters—Pakistan Bureau of Statistics (PBS) recalibrated Q1 GDP to an anemic 1.34%, Q2 to 1.53%, with Q3’s tentative mark hovering at 2.4%.
According to the Economic Survey, the state heralds manufacturing sector growth at 4.77%—a proclamation seemingly discordant with the stark decline in large-scale manufacturing (LSM), which nosedived 1.47% during July-March FY25. This deepens the contrast with the previous year’s already dismal -0.22% in the corresponding span. The government, however, attempts to drape a silver lining over these dull clouds, asserting that nearly half of all LSM subsectors exhibited incremental uplift—citing apparel, textile, pharmaceuticals, coke and petroleum, and the automobile industry as pockets of vitality amid industrial stagnation.
This attempt to accentuate optimism raises speculation: could such narrative framing prelude a quiet restructuring of industrial weights to artificially enhance the statistical sheen of growth? Skepticism, in this light, becomes less an opinion and more a necessary safeguard. Meanwhile, inflation—a specter that long haunted Pakistan’s households—has considerably receded. A central pivot behind this relief is the slump in wheat prices, precipitated by the IMF’s prohibition against both provincial and federal interventions in wheat procurement and support pricing. Yet, what appears as temporary consumer respite may morph into agricultural peril, as cultivators now contemplate more profitable alternatives, potentially shrinking wheat cultivation in the subsequent cycle and thrusting the country toward import dependence.
Curiously, amid this economic audit, labor market metrics are conspicuously outdated or absent. The survey sidesteps contemporary unemployment rates, anchoring instead to relic data from 2020-21. Despite this glaring lacuna, verbose passages trumpet policy commitments—from gender parity frameworks and the Prime Minister’s Women Empowerment Initiative 2024, to various upskilling drives under the PM’s Youth Programme. There are references to green and digital employment futures, but the omission of hard statistics dilutes their impact.
The section on overseas labor adds to the obscurity. Rather than providing a precise snapshot of external employment trends in 2024-25, it presents a cumulative tally dating back to 1972—an aggregation too unwieldy to offer any relevant insight for present-day policy evaluation. In sum, while Pakistan’s economic compendium strives to spin resilience and revival, a closer read reveals troubling inconsistencies and omissions—like a gilded scroll where the ink fades upon scrutiny.
The Economic Survey paints a rather grim portrait of Pakistan’s financial architecture, revealing a net capital exodus amounting to $1.6 billion. This drain stems largely from intensified government debt servicing, despite a tapering of gross liabilities. In essence, the financial account remains a precarious pillar, one that will likely demand a renewed cycle of borrowing and debt rollovers in the coming fiscal cycle to avoid collapse.
Spending surged dramatically—total outlays for July to March FY25 hit Rs16.337 trillion, an eye-watering 19.4% increase over the Rs13.682 trillion logged during the same stretch last year. Of that spike, current expenditures alone swelled by 18.3%, despite what is described as a “significant slowdown” in debt servicing growth. Debt-related payments still expanded 16.7% this fiscal year, but paled in comparison to the previous year’s 54% explosion—largely because the discount rate has cooled from a punishing 22% to a comparatively modest 11% as of last month.
The state had forecast a 21% uptick in current expenditures for FY25. Given the heightened defence posture following India’s recent provocation—swiftly and decisively countered by Pakistan—this ceiling is poised to be breached. The military response and its aftershocks may well tilt budgetary priorities even further toward security, draining funds from other crucial sectors. Although the government attributes the spending hike to a “marked increase” in development expenditure, the data whispers a different story. According to the Planning Ministry’s own portal, development authorisations stood at Rs894 billion from July to April 2025. Yet, actual funds released and utilized—tracked via SAP—barely reached Rs449 billion, less than half the claimed figure. The disconnect underscores a chronic bottleneck between planning and execution.
Even within that spending, the lion’s share remains tethered to physical infrastructure, leaving social development—particularly education—severely underfunded. Ironically, it was precisely this focus on human capital that fueled China’s meteoric economic ascent, enabling it to withstand geopolitical pressures including tariff wars with the U.S. Pakistan, by contrast, risks compounding its structural weaknesses by continuing to sideline this cornerstone of long-term growth.
Amid mounting climate threats, the government has signaled some degree of seriousness, reflected in the IMF’s greenlighting of the $1.4 billion Resilience and Sustainability Facility. Still, the survey’s statistical backbone lags reality, while the narrative leans heavily on state-sanctioned optimism. Assertions of improved tax-to-GDP ratios and revenue upticks rest on a shaky foundation dominated by regressive indirect taxes—levies that disproportionately burden the poor while sparing the affluent.
As geopolitical volatility surges, oil prices have again climbed in the wake of renewed hostilities between Iran and Israel. This spells another storm for Pakistan’s balance of payments. Costlier oil imports will bloat the trade deficit, deteriorate the current account, and deepen rupee depreciation. As the currency weakens, interest payments swell, feeding an already expanding fiscal chasm. The compounding effect of these spirals will test Pakistan’s economic resilience.
The survey’s figures and omissions paint a portrait of a nation treading a precarious path. With rising oil prices, growing security expenditures, and deep-rooted structural weaknesses, Pakistan’s economy faces a confluence of challenges that short-term fixes and optimistic narratives cannot solve. Without shifting focus toward genuine development, inclusive taxation, and long-term resilience planning, the country’s fiscal future remains uncertain—and increasingly unsustainable.