Pakistan’s economy is a tale of highs and lows, and the Finance Division’s February Economic Update and Outlook offers a front-row seat to the ride. With remittances surging, inflation taming, and private-sector credit soaring, there’s a whiff of optimism in the air.
But beneath the headlines, the reality is messier—millions are still stretched thin, manufacturing’s stumbling, and those big investment promises? Mostly hot air so far. Let us unpack the numbers and see if this is a real turnaround or just another mirage in the desert.
The Finance Division recently shared its February Economic Update and Outlook, spotlighting a trio of encouraging signs. First, remittances have soared by an impressive 31.7% from July to January 2025 compared to the same stretch last year. Inflation, measured by the consumer price index (CPI), has also dropped dramatically to 6.5% over the same period, down from a hefty 28.3% the year prior. For the first time in nearly seven years, Pakistan’s weekly Sensitive Price Indicator (SPI) showed a year-on-year (YoY) decline, dropping 0.9% for the week ending March 6, 2025. The dip was largely due to lower prices of essential items such as onions, tea, garlic, tomatoes, and pulses, along with a slight reduction in petrol and diesel rates.
On a week-on-week (WoW) basis, the SPI saw a modest decline of 0.09%, signaling a gradual easing of inflationary pressures. However, the strain on the public’s purchasing power remains. Analysts linked the drop in inflation to better supply chain management, stable fuel prices, and targeted government measures in key sectors, providing some relief to consumers despite ongoing economic hardships.
Lastly, credit flowing to the private sector has jumped from 246.8 billion rupees (July to mid-February 2024) to a robust 742.1 billion rupees this year. This boost in remittances didn’t happen by accident. A few years back, Pakistan ditched a misguided attempt to peg the rupee to the dollar while foreign reserves were dangerously thin. That blunder cost the country $4 billion in remittance losses in 2022-23. Since then, smarter policies encouraging official channels have fueled a steady climb in these vital inflows. Meanwhile, the steep drop in CPI is a welcome relief—though it’s mostly felt by the lucky few, about 7% of workers, whose wages have kept pace with inflation thanks to regular budget boosts, all funded by taxpayers.
For the other 93%, mostly private-sector employees, the story is bleaker. Many haven’t seen a meaningful raise in four or five years. Even with inflation cooling, their incomes have lost 25-30% of their buying power, leaving them stretched thin. Some independent economists argue the CPI paints too rosy a picture anyway, pointing to flaws like factoring in subsidized electricity rates, using discounted prices for essentials that are often missing from store shelves, and lowballing rent costs.
On the credit front, Finance Minister Muhammad Aurangzeb has long touted the private sector as the economy’s growth engine, and the numbers back him up—credit has surged by 200%. But dig deeper, and the shine fades. The starting point was so low that this leap doesn’t signal a real boom in production. Worse, much of that money seems to have flowed into the stock market, which doesn’t necessarily translate to more jobs or output—key goals for any government. The large-scale manufacturing (LSM) sector underscores this disconnect, shrinking by 1.87% from July to December 2024, compared to a 0.98% dip the year before, and plunging 3.73% in December alone—far from the 3% growth seen in December 2023.
The latest update tries to spin this, claiming LSM is on a “month-on-month recovery” with a 19.1% jump from November to December 2024. But that doesn’t hold up. The half-yearly report showed November LSM growth at negative 3.81%, so December’s negative 3.73% hardly suggests a 19.1% rebound. No January Update was released to clarify things, leaving the claim shaky at best.
Looking ahead, the report pins hopes on agriculture, citing government support and farm tech investments. Optimism’s nice, but it’s no guarantee—Pakistan’s seen plenty of unmet expectations before. Exports are up 7.6% from July to January, a solid gain, though imports climbed faster at 10.9%, hinting at a widening trade gap once import curbs ease or external boosts, like India’s now-lifted rice export ban or Bangladesh’s stabilizing politics, fade away.
Foreign direct investment ticked up 25.6%, from $1.35 billion to $1.97 billion, but that’s still a trickle compared to the flood of investment promises signed in recent months—deals yet to turn into hard cash. Pakistan’s economy remains on shaky ground, teetering between fragile hope and stubborn challenges. The government’s reform plans could be a game-changer, but only if they move fast. For now, it’s a waiting game—and a wish for better days.
Pakistan’s economic journey feels like a tightrope walk over a canyon—breathtaking progress in spots, but one misstep from a plunge. Remittances and credit are flexing muscle, yet the average worker’s wallet is lighter than ever, and manufacturing’s slump casts a long shadow. The government’s betting on reforms and farm fixes to pull off a save, but hope’s no substitute for action. For now, the nation holds its breath, waiting to see if these green shoots bloom—or wither under the weight of promises yet to be kept.