Khashif Talks Unlock Knowledge & Explore with Khashif Talks!
Pakistan’s economy stands at a critical juncture, with the government and stakeholders working tirelessly to steer the nation toward sustainable growth and fiscal stability. As we look ahead to FY25, several key initiatives and reforms are set to shape the economic landscape. From fiscal consolidation to structural reforms and IMF support, here’s a comprehensive overview of Pakistan’s economic roadmap.
The government is prioritizing fiscal consolidation to stabilize the economy. By enhancing revenue collection and controlling expenditures, Pakistan aims to reduce its fiscal deficit to 4.9% of GDP in FY25. This disciplined approach is critical for long-term growth. Key measures include streamlining tax collection to boost revenue, rationalizing subsidies and non-essential expenditures, and prioritizing investments in infrastructure and human capital.
To reduce fiscal burdens and improve efficiency, Pakistan plans to privatize 24 state-owned enterprises (SOEs) between 2024 and 2029. This move will reduce government liabilities and attract private sector investment. Additionally, the government will integrate all SOEs into a new legal framework by June 2025, ensuring better governance and accountability. These reforms are essential for fostering a competitive and resilient economy.
Pakistan’s trade dynamics are improving. The current account surplus (CAS) is projected at USD 940 million (0.24% of GDP) for FY25. However, the trade deficit will remain significant at USD 26.7 billion, driven by a 12% YoY increase in imports and a 6% growth in exports. On a positive note, remittances are expected to grow by 21% YoY to USD 36.6 billion, providing much-needed support to the external account.
Pakistan has secured an Extended Fund Facility (EFF) from the IMF, valued at USD 7 billion, which will play a pivotal role in stabilizing the economy. For FY25, the financing plan includes USD 16.4 billion in rollovers, ensuring liquidity and confidence in the financial system. This IMF program, combined with stringent monetary and fiscal measures, will help sustain the reduction in inflationary pressures.
The State Bank of Pakistan (SBP) is expected to end FY25 with reserves of USD 13.0 billion, supported by the IMF program and the removal of multiple currency practices. As a result, the exchange rate will stabilize, with the USD/PKR rate expected to hover around 285 by June 2025 and 293.6 by December 2025. This stability will boost investor confidence and support economic growth.
Inflation is expected to average 6.5% in FY25, reflecting the impact of stringent monetary and fiscal measures. With inflationary pressures under control, the policy rate will likely pause at 12%, balancing growth support and price stability.
Pakistan’s GDP growth is projected at 2.8% in FY25, with a significant uptick to 5.1% in FY26. Sector-wise, the agriculture sector will grow by 0.6%, while industry and services will expand by 1.8% and 3.9%, respectively. These emerging signs of growth highlight the potential for a gradual economic recovery, driven by reforms and strategic investments.
Pakistan’s economic roadmap for FY25 reflects a commitment to fiscal discipline, structural reforms, and sustainable growth. With IMF support, strengthened reserves, and a focus on privatization, the nation is poised to overcome challenges and unlock its economic potential. While the road ahead may be challenging, the combined efforts of the government, private sector, and international partners offer hope for a brighter economic future.
