The country’s economy stages a comeback in 2024

LAHORE, Dec 31 (SABAH): The year 2024 glides by after ups and downs in several spheres of life across the world.

Pakistan has a good news to share on economic front, where it witnessed turnaround in many ways after the International Monetary Fund (IMF) approved the much-awaited $7 billion Extended Fund Facility (EFF) in September.

Several reports say Pakistan’s economic outlook is witnessing positive changes, driven by continuous efforts to achieve developmental goals and restore stability.

The IMF projects a GDP growth rate of 3.2 percent for FY2025, with the World Bank and the Asian Development Bank forecasting growth at 2.8 percent and 3 percent, respectively.

Major contributors to this turnaround included eased import restrictions, reduced inflation and improved business conditions.

The Pakistan Stock Exchange saw historic gains, with the KSE-100 index surging from 58,000 to 110,000 points. Foreign Exchange reserves also grew from $7 billion to $12 billion, covering 2.5 months of imports.

Inflation significantly dropped from 29.2 per cent in 2023 to 4.9 per cent in 2024, and interest rates decreased from 22 per cent to 13 per cent.

On the other hand, remittances rose by 34 per cent, while exports increased by 12.57 per cent. With continued reforms and political stability, it is believed that Pakistan’s economy is poised for sustained growth.

In September, the International Monetary Fund (IMF) approved the much-awaited $7 billion Extended Fund Facility (EFF) for Pakistan.

The decision was made during an Executive Board meeting chaired by IMF Managing Director Kristalina Georgieva in Washington, with Pakistan’s agenda at the forefront.

The EFF was agreed upon between Pakistan and the IMF on July 12 this year. With the approval of the loan, Pakistan’s economic and foreign exchange reserves improved.

The State Bank of Pakistan (SBP) received the first installment of loan from the International Monetary Fund (IMF) on Sept 29. Pakistan received $1.026 billion as part of the $7 billion loan agreement.

The Pakistan Stock Exchange (PSX) attained the historic high of 100,346 points on Nov 28 on the heels of unprecedented streak of surge in the last one month or so.

The KSE-100 index surged by 1,077 points to reach a new milestone. It, however, closed at 100,082 on the fourth working day of the week.

A day earlier (Nov 27), the PSX witnessed a rally and the KSE-100 index crossed the 99,000 mark. At one point, the index had risen by 1,642 points to reach 99,820 points. However, at the close of trading, the index was reduced to 99,269 points.

The KSE-100 index, which is a key benchmark in PSX, achieved one milestone after another in November 2024 amid recurring reports of economic stability mainly due to the recent loan disbursement by the International Monetary Fund (IMF).

The reassuring agreement with the international lender and Pakistan economic czar Muhammad Aurangzeb’s subsequent announcement ruling out a mini-budget boosted investor confidence.

The stock surge also holds symbolic significance as it is considered an indicator of country’s economic trajectory.

In October the final bidding process for the privatisation of Pakistan International Airlines (PIA) was held, with just one participant for a stake in the national carrier.

Saad Nazir, chairman of real-estate development company Blue World City, confirmed to media that his group placed a bid at a ceremony at a hotel in Islamabad.

The real estate group placed a bid of Rs10 billion – way below the Privatisation Commission’s expectation of Rs85.03bn. The bid put the privatisation of the national carrier in jeopardy.

The lone bidder refused to increase the bid, stating that the government might continue to run the entity on its own if it did not want to sell it.

Federal Finance Minister Mohammad Aurangzeb said this past week the country’s economy had been put on right track and was moving forward.

Speaking to a group of farmers and others, he admitted that the country had been facing many issues, and “we do not have a magic wand to set everything right instantly.”

“Policy rate has been reduced substantially which is an indication that the country is moving in the right direction. The country must move towards economic stability and develop an export-oriented economy,” the minister emphasised.

Minister Aurangzeb said “we will not sit idle in Islamabad; we will go to the people to seek budgetary proposals. It is a wrong trend that stakeholders throng Islamabad during the budget days.” He advised traders to concentrate on strengthening economy and help the government meet its objectives.

He boasted inflation had reduced to five percent, and coffers had significant foreign reserves. He said the government was endeavouring to bring down interest rate to single digit.

With reduction in the interest rate, the economy would improve. “We will stabilise economy in 2025 by plunging interest rate further to single digit,” he promised.

He also noted that the agriculture sector showed positive developments in 2024. Rice exports enhanced and remittances [from overseas Pakistanis] last year were $30.2 billion. He expressed optimism that remittances would exceed $35 billion this year. The agriculture and poultry sectors needed to be further developed, the minister added.

The minister stressed that concerted efforts should be made for economic stability. There might be political differences, but everyone should join hands for the sake of the country, he said while calling for a “charter of economy”.

The minister said taxation, energy and government institutions were being reformed. “Educational institutions and hospitals can run on charity, but the country does not. A country runs on taxes,” he said.

Minister Aurangzeb claimed the tax authority was being reformed. The government was moving towards end-to-end digitisation, with data available, he added.

“My data is with the FBR, NADRA and the tax authority. Any discrepancies in data represent a leakage, which burden the salaried class and the manufacturing industry.”

He stated that the government did not want to put any additional burden on the salaried class. However, it is necessary to bring everyone into the tax net, and the government is working to close the leakage in the taxation system. Those who are not paying taxes will be required to pay them.

He pointed out that Pakistan’s tax-to-GDP ratio was 9pc to 10pc, while countries in the region are at 18pc. “The goal is to bring the country’s tax-to-GDP ratio to 13.5pc,” he said.

He said the energy sector was being reformed. Tariffs would be reduced and performance of distribution companies improved, he pledged.