Pakistan’s economy turning a corner after earlier challenges: Finance Minister

ISLAMABAD: Speaking on the current state of the economy, at the launch event of Pakistan Economic Survey FY2024-25, Finance Minister Muhammad Aurangzeb started by contextualising Pakistan’s economic recovery within the broader global landscape. He noted that global GDP growth, which stood at 3.5 per cent in 2023, has declined to 3.3 per cent, and is projected to fall further to 2.8 per cent in 2025. “Our recovery should be viewed in light of this global slowdown,” he said.

Pakistan’s economic trajectory, while initially bleak, has shown signs of improvement. In 2023, the country faced a negative GDP growth of -2 per cent, but rebounded to 2.5 per cent in 2024, and is expected to grow by 2.7 per cent in 2025.

Aurangzeb also addressed inflation, both globally and domestically. Global inflation, he said, has been on a downward trend, from 6.8 per cent in 2023 to 4.3 per cent in 2025. Pakistan’s inflation situation has seen a much sharper improvement, from over 29 per cent in 2023, down to nearly 23 per cent in 2024, and now a projected 4.6 per cent in 2025.

Moving towards domestic metrics, the finance minister pointed out that the policy rate has been gradually reduced, signaling a move towards greater macroeconomic stability. “We are moving towards stability,” he said, adding that while challenges remain, important groundwork has been laid. “It is also necessary to appreciate the good work that has been done in the past,” he said.

He highlighted reforms in the tax system, attributing much of the progress to technology. “This transformation has taken two to three years,” he said, underlining that the digital shift has played a significant role in improving compliance and transparency.

Turning to the energy sector, Aurangzeb praised the efforts of Power Minister Awais Leghari and Energy Minister Ali Pervaiz Malik, stating they are doing commendable work in driving energy reforms. He noted improved governance in the power sector, which has led to better recoveries.

However, the minister acknowledged that not all reform areas have seen progress. He candidly stated, “There is a lot of talk about pension reform, but nothing has happened in it yet.”

He acknowledged that while pension reform is frequently discussed, no substantial progress has been made so far. However, he explained that over the past year, several ministries have been merged as part of administrative restructuring.

Detailing the process, he said ministries, attached departments, and CEOs are called in for consultations, their input is heard, and then a subcommittee takes their proposals forward. These recommendations are subsequently presented to the cabinet for approval and implementation.

Aurangzeb highlighted the importance of structural reforms, stating that such measures are vital to fundamentally reshape the economic framework of the country. There is an enforcement issue regarding the implementation of the minimum wage, Finance Minister said, “Structural reforms will lead us towards sustainable development.”

One key initiative in this regard was the division of the National Transmission and Despatch Company (NTDC) into three separate entities. This became an important step towards improving efficiency and governance in the power sector.

He also talked about the success of the Roshan Digital Account (RDA) initiative, with 814,000 accounts opened so far. These accounts have become a crucial channel for overseas Pakistanis to invest in the country, significantly contributing to the economy.

In fact, remittances have increased by approximately $10 billion over the last two years, reaching a record $37-$38 billion by the end of the current fiscal year, the finance minister said. He also credited the RDAs for playing a key role in this growth, with deposits now crossing the $10 billion mark.

On the trade front, imports have risen by 12 per cent in the current financial year, with machinery imports alone increasing by 16.5 per cent. Aurangzeb described this trend as positive for the economy, signaling industrial activity and long-term productivity. He also mentioned that agricultural machinery imports are contributing to this increase.

The minister reported that the external sector, previously burdened by dual crises, has stabilised, with the current account now in surplus. Tax collection has improved significantly, with a 26 per cent increase in revenues and the number of individual tax filers doubling during the fiscal year.

In terms of fiscal strategy, the finance minister stated that the government intends to shift toward borrowing from the private sector on its own terms, indicating a move away from dependency on external lenders. He also acknowledged past inefficiencies, pointing to the Pakistan Agricultural Storage and Services Corporation Limited (PASSCO) as a former hub of corruption, signaling intent for deeper institutional reforms.

“Our focus will be on debt management in the coming year,” Finance Minister said.

He said that food storage is a big issue in the country. “We have started building electronics warehouses in Punjab. Food storage will eliminate the role of middlemen, farmers will get better prices,” he added.

He also spoke on the recent revisions in Pakistan’s credit ratings, and appreciated the international credit institutions improving Pakistan’s ratings.

He also talked about the recent Pakistan-India conflict, saying, “Our defense institutions showed their mettle against India. There was also a war with India on the economic front. India was trying to prevent the IMF from lending to Pakistan. By the Grace of Allah, not only did we get an EFF loan but also a climate financing program,” Aurangzeb said.

He added that international financial institutions are standing with Pakistan, adding that the economy is a very important component of national security. “The aim of the program with the IMF is to achieve sustainable economic stability. This has provided us with resources to carry out structural reforms,” Aurangzeb said.

Shedding light on Pakistan’s climate goals, he said that the money from the climate financing program will be used on various projects from next fiscal year. “Saying that climate change has no effect on crop growth is completely wrong; $600-$700 million will be spent annually on climate change,” he said, adding, “If the population growth rate remains at 2.55 per cent, what will happen to the country?”

Speaking about the Economic Survey FY25, the finance minister said, “This is the data of the Government of Pakistan. If you see any discrepancy in this, please share it with us. Discuss with us in this regard,” he said, adding, “I myself have come from the private sector, there is a lot of room for improvement.”

Aurangzeb said that the government has presented its own data, “We will see the World Bank report when it reaches us.” He said that the government’s job should be to provide an ecosystem, “I am not in favor of us raising slogans that we will provide ten million jobs.”

He said that there is no shortage of development budget after the 18th Amendment. “The country’s development budget has exceeded Rs4,000 billion,” he said.

On a question related to expenditure cute, Finance Secretary said, “Further reductions beyond those already implemented would not have been possible. More details will be provided tomorrow.”.

Also read: Economic Survey FY25: low inflation, CA surplus, stable macroeconomic indicators