No doubt, Pakistan’s economy is showing signs of stability but underlying structural problems remain unsolved. The stock market keeps going up and up, while the current account deficit has been controlled. In fact, it was USD 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,

On the other hand, remittances surged by nearly USD 8.299 billion to reach a new record high. What is more, the upward trend continues as evidenced by the latest figures. The foreign exchange reserves have also improved recently — to USD 14,243.2 million in August 2025 from USD 9,153.3 million in August 2024. All these are unmistakable signs of economic stability which is endorsed by the latest upgrade by Moody’s from Caa2 to Caa1 with a stable outlook.

Despite these positive indicators, the fact remains that the stability achieved is not accompanied by growth nor has it been translated into wider economic revival. Poverty is on the rise while employment opportunities are shrinking. The reason for this stagnation is that the core problems of the economy remain unaddressed. A major sign of stagnation is the lacklustre performance of the export sector. For example, there was a rise in the trade deficit — from USD 22.177 billion in 2023-24 to USD 26.785 billion in 2024-25 with the July 2025 deficit at negative USD 2.679 billion against negative USD 2.488 billion in July 2024. The decline in exports is reflected by negative growth in the large-scale manufacturing sector in 2024-25 (1.21 percent).

The same is the case with foreign investment. FDI is not flowing in as expected because the larger picture is not encouraging. Banking and telecom companies which invested during the boom of 2002–07 have either withdrawn or are not pumping in new funds. Hopes of getting tens of billions of dollars of investment from friendly countries in the Middle East have also now faded. As for the prospects of US investment, it is an open guess as to when it will materialise in view of the see-saw in bilateral relations over the last few decades.

As for the current boom in Pakistan’s stock market, it is no indicator of a wider economic turnaround. Buying and selling of shares is a game that a small number of comparatively well-to-do people play. Those who deal in stocks and shares are not  members of the general public. It may be added here that the number of companies listed on the PSX constitute just a fraction of the total number of business entities and employers in the country. Foreign exchange reserves are also in a vulnerable position, as the loans from friendly countries alone are USD 16 billion, requiring a yearly request to roll over till the IMF programme duration which is scheduled to end on 15 September 2027.

The real economic situation is defined by the fact that poverty levels in Pakistan today are as high as 44.7 percent as reported by the World Bank and other international agencies. Unemployment is also on the rise which is proved by the increasing migration figures over the last three years. According to media reports, more than a million Pakistanis, including doctors, engineers and IT professionals, left the country last year in search of better job opportunities.

Inflation has come down from a peak of 38 percent in May 2023 to 3.2 percent by June 2025. But price stability has been achieved by depressing economic activity and slowing growth which has brought little relief for the common man. Inflation is reported to be in single digit, but for the average man there is little difference in the market situation. Fuel, electricity and the daily essentials remain unaffordable for the common run of people.

Government spokesmens keep taking credit for reserves rising to $14.5 billion and a current account surplus for the first time in 14 years. But these improvements have nothing to with any change in  economic fundamentals. The rise in  forex reserves is due to remittances, which reached $38.3 billion, and import restrictions. On the contrary, exports remain depressed which reflect the real situation of an economy.

Needless to say, without rapid export growth, the country’s external sector remains exposed to external shocks and sudden shifts in global capital and labour markets. The long-term remedy to our economic weaknesses lies in boosting value-added exports, industrial growth and bringing down energy costs which are exorbitantly high. Comprehensive reforms in these sectors are the need of the hour to put the economy on a sustainable growth path.