This year’s economic scorecard…By Hina Ayra
The year 2024 represents a critical juncture for Pakistan’s economy, characterised by a confluence of significant challenges and emerging opportunities.
Throughout this period, Pakistan encountered a range of obstacles arising from a complex global economic environment, including fluctuations in commodity prices, alterations in trade dynamics, and geopolitical tensions with extensive implications.
Domestically, the government implemented key policy decisions aimed at stabilising the economy. Reforms in taxation and monetary policy were enacted to mitigate inflation and foster foreign investment. Infrastructure development initiatives were prioritised to stimulate economic growth and generate employment, notwithstanding the varying pace of implementation across different regions. Geopolitical developments, both regionally and globally, have considerably influenced Pakistan’s economic trajectory. Shifting alliances and trade relationships have impacted access to markets and the flow of foreign investment.
Natural occurrences, such as seasonal monsoons, have introduced further complexity to the economic landscape, affecting agricultural output, which remains a vital component of Pakistan’s economy. Looking ahead, forecasts for 2025 evoke a sense of cautious optimism. Analysts predict a gradual recovery, contingent upon the continuation of reforms, stable political conditions, and improvements in global economic circumstances. A concerted effort to enhance trade relationships and attract foreign direct investment will be essential for sustaining economic growth.
In 2024, Pakistan’s economy exhibited a moderate recovery, with Gross Domestic Product (GDP) growth estimated at 3.5 per cent, reflecting a slight improvement from the previous year’s sluggish performance. This recovery was predominantly fueled by the agriculture and services sectors, which rebounded following favourable weather conditions and the alleviation of disruptions related to the pandemic. Nevertheless, industrial output continued to face constraints due to energy shortages and inflationary pressures.
Inflation remained a significant challenge, averaging approximately 22 per cent throughout the year. Although global energy prices showed some stabilisation, domestic inflation was exacerbated by inefficiencies in supply chains, currency depreciation, and rising utility tariffs. By the end of the year, the Pakistani rupee exhibited volatility and stabilised at approximately Rs305 to the US dollar, following intervention measures implemented by the central bank.
Projections for 2025 suggest a gradual reduction in inflation, contingent upon the stability of global commodity prices and the maintenance of fiscal discipline. GDP growth is anticipated to rise to 4.0 per cent as energy projects become operational and investments in infrastructure increase. However, the realisation of these targets will depend significantly on political stability and the consistency of policy measures.
The government has adopted a cautious fiscal strategy to reduce the budget deficit, which currently stands at 7.2 per cent of GDP. Key measures implemented include the reduction of non-essential expenditures and the enhancement of tax collection efforts. The introduction of targeted subsidies for low-income households has played a vital role in alleviating the impact of inflation on the most vulnerable segments of the population.
On the monetary front, the State Bank of Pakistan has maintained a stringent monetary policy stance by keeping interest rates at historically high levels to mitigate inflation. Although this approach has resulted in a deceleration of credit growth and private-sector borrowing, it is considered a necessary measure to stabilise the economy and restore investor confidence.
For the year 2025, policymakers aim to achieve a balance between economic growth and stabilisation. It is anticipated that interest rates will gradually decrease if inflationary pressures subside, potentially stimulating private-sector activities. The government is also exploring innovative avenues for revenue generation, including the broadening of the tax base and the utilisation of digital technologies to enhance compliance.
In 2024, Pakistan’s trade deficit exhibited a modest contraction, driven by enhanced exports in textiles, information technology services, and agricultural products. Nevertheless, the nation’s dependence on imported energy and machinery continued to exert upward pressure on the import bill. The government’s initiatives promoting renewable energy projects yielded positive outcomes, contributing to a reduction in dependence on high-cost oil imports.
Remittances from expatriate Pakistanis were a crucial support to the economy, totalling $28 billion. However, the current account deficit persisted as a significant concern, highlighting the imperative for structural reforms aimed at bolstering export competitiveness and diversifying the economic framework. Looking forward, it is anticipated that the trade deficit will further decrease in 2025 as new export-oriented policies are implemented. Efforts to diminish reliance on energy imports and to enhance domestic production of machinery and industrial inputs will be vital. Remittances are also expected to stabilise, bolstered by strengthened relationships with the diaspora and incentives promoting formal remittance channels.
The agriculture sector demonstrated a recovery with a growth rate of 4.1 per cent, supported by favourable monsoon conditions and governmental assistance programs. Key agricultural outputs, including wheat, rice, and cotton, performed well, thereby improving rural livelihoods and food security. In 2025, advancements in mechanisation and the adoption of climate-resilient crop varieties are anticipated to further bolster productivity, aided by government subsidies and international partnerships.
Continued energy shortages have posed challenges to industrial productivity; however, renewable energy initiatives have gained traction. Investments in solar and wind energy projects have intensified, establishing a foundation for a more sustainable energy future. With major renewable energy projects scheduled for completion in 2025, the sector is poised for considerable growth, which is expected to decrease the reliance on fossil fuels and reduce production costs for various industries.
The information technology and tech sector has emerged as a notable success, with software exports surpassing $3.5 billion. Conditional to the government’s commitment to digital transformation and skill development can significantly contribute to this growth.
Provided that government policies are effectively implemented to support the information technology and service sectors, alongside ensuring timely and reliable access to the internet for these industries, it is anticipated that they will play a vital role in significantly enhancing the national treasury. By cultivating an environment that promotes growth, these sectors have the potential to make considerable contributions to the overall economic development of the country, thereby benefiting the national exchequer. Forecasting for 2025 indicates further expansion within the sector, with tech exports potentially reaching $4 billion, driven by escalating global demand for IT services and an expanding talent pool fostered through targeted training initiatives.
Pakistan has made progress in various areas, but significant challenges remain. Political instability, elevated public debt, and climate-related vulnerabilities continue to hinder economic advancement. The severe floods that occurred in 2022 and 2023 have left enduring effects, necessitating substantial resources for rehabilitation and the reconstruction of infrastructure in 2024.
In 2025, the primary challenges will include sustaining fiscal discipline in the face of rising global interest rates and navigating geopolitical tensions that may adversely affect trade and foreign investment. Enhancing climate resilience will remain a paramount concern, with anticipated increases in funding directed towards infrastructure improvements and disaster management systems.
The collaboration of the government with the International Monetary Fund (IMF) and other international entities will be crucial in ensuring financial stability. Structural reforms, particularly within the energy and tax sectors, will be essential for sustaining growth and mitigating vulnerabilities.
The economic landscape for Pakistan in 2024 reflects a narrative of cautious recovery amidst persistent challenges. While growth prospects have marginally improved, the nation’s economic resilience will depend on the effective execution of policies, targeted investments in critical sectors, and the cultivation of an environment conducive to sustainable development.
Forecasts for 2025 present a cautiously optimistic outlook, subject to the conditions of political stability and the successful execution of reforms. With the appropriate blend of policies and strategic investments, Pakistan can address its challenges and achieve sustained economic growth in the years ahead.
COURTESY 