Pakistan’s economy is on the mend following key structural reforms, Finance Minister Muhammad Aurangzeb said Monday while presenting the Economic Survey for FY2024–25.
“We were not moving in the right direction,” Aurangzeb admitted, but said the government had since implemented reforms to consolidate the economy—particularly in taxation, debt control, and energy.
He noted significant improvements in the power sector, with better governance in distribution companies after the inclusion of private sector professionals on their boards. “Recoveries have been remarkable,” he said, while acknowledging the need to tackle system leakages.
Public finances also benefited from a sharp cut in the policy rate, which helped reduce debt servicing costs by around Rs800 billion. “Debt servicing remains the single largest expense item, but we’ve saved nearly a trillion rupees,” he added.
The minister announced plans to privatise 24 state-owned enterprises (SOEs) in the coming year, after curbing annual losses of Rs800 billion. “We’ve stopped the bleeding,” he said.
Highlighting macroeconomic indicators, Aurangzeb said the current account recorded a surplus of $1.9 billion during July–April FY25, driven by strong IT exports. Remittances are projected to reach $37–38 billion by year-end, up from $27 billion two years ago.
He also placed Pakistan’s recovery within the broader global context, noting that world GDP growth has reached 2.8%.
“We need to first stop the bleeding and then address legacy issues,” Aurangzeb further said.
“The government is no longer a desperate borrower,” Aurangzeb said, crediting a significant reduction in the policy rate for saving nearly Rs1 trillion in debt servicing costs, including Rs800 billion in the current fiscal year.
The number of individual tax filers has doubled as Pakistan expanded and deepened its tax base, the minister said. During FY25, the government also retired Rs2.4 trillion in treasury bills and raised Rs610 billion through a newly introduced two-year zero-coupon bond, extending the average maturity of domestic debt from 2.9 to 3.5 years.
The government now projects FY26 as a “turnaround year,” with plans to privatise 24 loss-making state-owned enterprises. Aurangzeb said banks will also be expected to step up lending to the private sector.
The economy posted mixed results across sectors. Agriculture grew 2.6% despite falling production of key crops including cotton, wheat and maize. Rice exports, however, improved significantly. Construction posted a 6.6% growth rate, while services expanded by 2.9%.
Large-scale manufacturing (LSM) remained in contraction but showed signs of stabilisation. In March 2025, LSM grew 1.8% year-on-year, compared with 1.7% in the same month last year. However, a month-on-month decline of 4.6% was recorded, slightly better than February’s 5.6% fall.
Electricity generation capacity reached 46,605 MW, with 55.7% from thermal sources and 24.4% from hydropower. Consumption stood at 80,111 GWh, with nearly half used by households. Petroleum product demand rose 7% in the July–March period, with transport accounting for 80% of use.
Aurangzeb said governance in the power sector has improved, with private sector experts brought onto boards of power distribution companies. Recoveries were described as “remarkable,” though energy sector leakages remain a challenge.
The external sector saw improvement, with a $1.9 billion current account surplus in July–April FY25, driven by IT exports. Remittances are projected to hit $37–38 billion this fiscal year, up from $27 billion two years ago. Imports rose 12%.
On the climate front, Pakistan launched its Recharge Pakistan Project with $77 million in funding and introduced its first Carbon Market Policy at COP29.
“The next fiscal year will be a turnaround story,” Aurangzeb said, setting the tone for a budget expected to aim for IMF compliance, increased revenue, and growth-focused reforms.
Pakistan’s foreign exchange reserves rose to $16.64 billion Aurangzeb said addinf that it, boosted by improved economic indicators and renewed investor confidence, even as the agriculture sector posted weak growth due to poor crop yields.
Of the total reserves, the State Bank of Pakistan held $11.5 billion while commercial banks retained $5.14 billion. The increase follows improved credit ratings, with Fitch upgrading Pakistan’s sovereign rating from CCC+ to B- with a stable outlook.
The International Monetary Fund (IMF) acknowledged Pakistan’s progress under the Extended Fund Facility (EFF) and approved an additional $1.4 billion under the Resilience and Sustainability Facility (RSF) to support the country’s climate adaptation and disaster resilience efforts.
Pakistan’s stock market also performed strongly, with the benchmark index delivering a 50% return and gaining 78,000 points over the fiscal year, reflecting growing investor confidence.
Agriculture, however, remained under pressure. The sector recorded a modest 0.56% growth in FY25 due to a decline in major crop production. Officials acknowledged challenges including inadequate crop storage and limited farmer financing. Reforms are being explored to reduce middlemen’s role and improve farm-to-market access.
Meanwhile, more than 5,000 federal cost centres have been tagged under the government’s new Climate Budget Tagging initiative aimed at tracking climate-related spending.
In the social sector, the Benazir Income Support Programme (BISP) disbursed Rs593 billion during the fiscal year to support vulnerable households.
