Pakistan’s economy is showing signs of stability and gradual recovery, supported by strong macroeconomic fundamentals, declining inflation, and improved investor confidence.

Key policy measures, including fiscal discipline, monetary easing, and external financial support, have reinforced economic resilience. While challenges remain, ongoing reforms and strategic interventions are paving the way for sustainable growth. Pakistan’s economic outlook appears promising, supported by stable macroeconomic fundamentals and a gradual recovery across key industries, according to the Ministry of Finance. “Inflation is projected to stabilize around 7 percent in the coming months, creating a favorable environment for economic growth. This stability is expected to pave the way for lower policy rates, making borrowing more affordable for both businesses and consumers,” the ministry stated in its “State of Pakistan’s Economy Half-Yearly Report (July-December FY2025).”

The economy continued its recovery in the first half of FY2025, building on the stability achieved in FY2024 when GDP grew by 2.5 percent, reversing the previous year’s contraction. This progress was driven by strong macroeconomic policies, effective inflation control, and improved fiscal and external account balances. While the first quarter of FY2025 recorded a GDP growth of 0.92 percent—sustaining the positive momentum—it marked a slowdown compared to the 2.3 percent growth seen in the same period last year, largely due to moderated expansion in key sectors, particularly agriculture.

A crucial factor in economic stabilization has been the release of $1.03 billion under the IMF’s Extended Fund Facility (EFF), which strengthened fiscal and external resilience, reassured investors, and stimulated economic activity. Additionally, Pakistan’s successful hosting of the 2024 SCO Summit further boosted market confidence. Together, these factors signal a stable economic trajectory for FY2025 and beyond.

Inflation saw a sharp decline to 7.2 percent in H1-FY2025, a significant improvement from 28.8 percent a year earlier. This drop was attributed to easing global commodity prices, a stable exchange rate, and targeted government measures. The combination of monetary policy adjustments, fiscal discipline, and structural reforms has reinforced a sustainable growth path.

Agriculture performed strongly in FY2024, expanding by 6.2 percent, supported by increased investment, greater access to credit, and favorable weather. Leading indicators such as machinery sales and water availability suggest continued strength in the sector. Meanwhile, the industrial sector showed mixed results, with gradual improvements in textiles. The services sector remains on an upward trajectory, buoyed by recovering domestic activity and trade expansion.

On the external front, Pakistan posted a current account surplus of $1.21 billion in the first half of FY2025, as record-high remittances and strong exports helped balance the rising import bill. Foreign Direct Investment (FDI) also saw a 20 percent increase, primarily in the power and oil sectors, reinforcing confidence in the country’s economic prospects.

Pakistan’s foreign exchange reserves remain stable, covering over two months of imports, thanks to IMF disbursements and international financial support. The Pakistani rupee strengthened by 1.2 percent, reflecting positive external economic trends.

Fiscal discipline has also improved significantly. The government successfully reduced the fiscal deficit to just 0.04 percent of GDP between July and November FY2025, a notable turnaround from the previous year. This progress was driven by strong growth in tax and non-tax revenues, supported by reduced interest rates, a stable exchange rate, and improved financial management. With inflation on a downward trend and investor confidence growing, Pakistan is well-positioned to sustain economic momentum through FY2025. Key policy initiatives, such as monetary easing and export facilitation, are fostering a more business-friendly environment, while continued fiscal responsibility and favorable global conditions further reinforce this positive trajectory.

In a bid to address structural challenges and drive long-term development, the government has introduced its five-year economic roadmap, URAAN Pakistan. This homegrown transformation plan emphasizes inclusivity and self-reliance, aiming to steer the country toward sustainable growth. The latest economic report highlights Pakistan’s resilience and adaptability amid both global and domestic uncertainties. Targeted reforms, sound fiscal policies, and strategic interventions have played a key role in driving economic recovery. The government’s commitment to fiscal consolidation and prudent debt management is expected to keep the debt-to-GDP ratio on a downward path.

The external sector has also made strides in balancing trade flows, with record remittances and rising foreign investment strengthening external accounts. Stable foreign exchange reserves continue to provide a solid foundation for economic stability.

Despite global uncertainties, including a sluggish recovery in international trade and geopolitical challenges, Pakistan’s economy is showing encouraging signs of sustainable growth. Lower inflation, easing interest rates, and stable commodity prices have created a more favorable investment climate, paving the way for private sector expansion. However, structural issues such as fiscal constraints, rigid economic policies, and high public debt still require focused reforms to ensure long-term stability and resilience.

Despite global uncertainties and structural challenges, Pakistan’s economy is on a path to steady recovery. Declining inflation, a stable exchange rate, and fiscal improvements have created a favorable environment for investment and expansion. With continued policy reforms, private sector-driven growth, and a focus on long-term economic transformation through initiatives like URAAN Pakistan, the country is well-positioned to sustain its positive momentum in the coming years.