Pakistan’s economy is facing a delicate balance between encouraging remittance inflows, widening trade deficits, and the conditions tied to the ongoing IMF programme.
While remittances have provided crucial relief, sustaining this momentum against geopolitical uncertainties remains a challenge. At the same time, trade figures reflect both growth in exports and imports, though the swelling deficit underscores deeper vulnerabilities within the external sector.
The Pakistan Stock Exchange is at a record high, attributed to the strengthening of Pakistan-China trade ties, ongoing discussions about CPEC, rising foreign exchange reserves, and government efforts to address circular debt and stabilise the rupee.
There is no doubt that apart from the stock exchange performance the current account deficit has performed well and plunged by 27 percent in July 2025 but is still an improvement when compared to July 2024 — and even more praiseworthy was the $2.1 billion surplus for July-June 2025.
Inflation too has declined dramatically — from 28.31 percent in 2023-24 to 11.09 percent in 2024-25 as per data on the State Bank of Pakistan website. The plunge in the current account last month is partly attributable to a rise in the trade deficit — from $22.177 billion in 2023-24 to $26.785 billion in 2024-25 with the July 2025 deficit at negative $2.679 billion against negative $2.488 billion in July 2024.
The decline in exports is mirrored by a rise in negativity of the large-scale manufacturing sector in 2024-25 (1.21 percent) and though credit to the private sector rose to 741.3 billion rupees against 527.3 billion rupees the year before yet reports indicate that the rise was mainly channeled into speculative investment on the stock market rather than in industry.
Pakistan’s stock market, with relatively a small number of key players compared to India’s, is taxed at a low rate evident from the 15 billion rupees per annum revenue collected from this source as opposed to over a 100 billion rupees in India.
The stock market index has been consistently used by successive governments as an indicator of improved economic performance; however, this claim is easily refuted as those who deal in stocks and shares are not the general public and certainly not the poor and vulnerable. This is reflected by the fact that poverty levels in Pakistan today are a high of 44.7 percent as per the World Bank. Furthermore, the number of entities listed on the bourse are just a fraction of the total number of business entities and employers in the country.
Remittance inflows surged strikingly, climbing by nearly $8.299 billion, serving as the principal driver behind last year’s current account surplus. This momentum must endure in the present fiscal year, and July’s data suggests the pattern persists—remittances rose from $2,994 million in July 2024 to $3,214.4 million last month. Yet, shifting geopolitical tides may challenge the sustainability of this vital source in the months ahead.
Within the business sphere, discontent has amplified over the withdrawal of fiscal and monetary concessions in the current budget—measures enforced under the International Monetary Fund (IMF) programme. Talks between the government and business leaders continue without breakthrough. Meanwhile, taxation on traders, previously deferred amid threats of nationwide strikes and also linked to IMF directives, remains a looming concern, leaving the government’s capacity to resist Fund pressure uncertain.
Although foreign exchange reserves appear healthier—climbing to $14,243.2 million on 8 August 2025 compared to $9,153.3 million a year earlier—the reliance on rollovers remains an uneasy truth. Commitments from allied nations amounting to $16 billion must be renewed annually throughout the IMF programme, set to conclude on September 15, 2027. This dependence underscores the fragility beneath the apparent improvement.
Pakistan’s trade deficit widened markedly in July 2025, swelling by 10.57 percent month-on-month to $3.18 billion. Revised statistics from the Pakistan Bureau of Statistics reveal exports climbing 8.44 percent in dollar terms, reaching $2.69 billion from June’s $2.48 billion. Imports, however, rose at a sharper pace of 9.58 percent, touching $5.87 billion compared to $5.35 billion in June, thus deepening the imbalance.
On a year-on-year basis, the deterioration is more pronounced. The July 2025 trade deficit widened by 29.43 percent over July 2024. Exports did post a robust rise of 16.43 percent, increasing from $2.31 billion to $2.69 billion, yet imports surged further—by 23.13 percent—climbing from $4.76 billion to $5.87 billion.
This dual escalation mirrors global trade currents but also exposes Pakistan’s structural frailties. The widening gap emphasizes the urgency of bolstering exports while trimming current expenditure, for these remain the only viable levers to restore a semblance of external stability.
Despite improved reserves and strong remittance inflows, Pakistan’s external position remains precarious, tethered to IMF commitments and recurring rollovers from partner nations. With imports consistently outpacing exports, the trade deficit has become an urgent concern. The path forward lies in aggressively expanding exports, curbing unnecessary expenditures, and reducing reliance on borrowed support, if long-term economic stability is to be achieved.