Category: Business

Pakistan’s economy continues to post modest growth as macroeconomic indicators such as Gross Domestic Product (GDP) and per capita income have increased in Fiscal Year (FY) 2024-25 compared to FY 2023-24. The government announced that it anticipated the economy to grow at a rate of 2.68 percent.

The figure displays a steep drop from initial projections which suggested that the rate of economic growth would sit at 3.6 percent in FY 2024-25. The government’s statement from Tuesday indicates that the country will not be able to meet the targeted GDP figure. 

The latest growth figures released by the government align closely with revised projections released by international financial institutions such as the World Bank and International Monetary Fund (IMF). Data from the World Bank indicates that Pakistan’s economy is expected to grow by 2.7 percent during the current FY, falling marginally from earlier estimations of a 2.8 percent growth rate.

However, the International Monetary Fund’s (IMF) growth revisions have been more pronounced as the lender expects real GDP growth to sit at just 2.6 percent. This is a large deviation from the growth rate the IMF originally anticipated, which stood at a respectable three percent.

The Asian Development Bank (ADB) estimates growth rate to sit at 2.8 percent, depicting the institutions’ optimism surrounding Pakistan’s economy. 

The revised GDP growth rates were approved during a meeting of the National Accounts Committee (NAC). As per reports, Planning Commission Secretary Awais Manzur Sumra chaired the 113th NAC meeting during which the aforementioned revisions were approved.

Reports reveal that Paksitan’s economic recovery is stagnating because of falling industrial output and pressures on the economy stemming from external financing issues. The large scale manufacturing sector witnessed a contraction of 1.53 percent in the first three quarters of FY 2024-25 accompanied by a 3.38 percent decline in the mining and quarrying sector.

The agricultural sector is projected to log a marginal 0.56 percent growth during FY 2024-25, a figure lower than what most economists would prefer.  Despite challenges faced by the agricultural and industrial sectors, the service sector has witnessed sizable growth, resulting in the size of the economy reportedly rising to $410.96 billion in FY 2024-25.

Compared to the previous FY, the figure stood at a much higher than the 371.66 billion nominal GDP figure indicating a revival of the economy. Per capita income has grown as well, reportedly rising from $1,680 in FY 2024-25 to $1824 for the current FY.

Lawmakers in Islamabad have reportedly engaged in discussions with commercial banks from the United Arab Emirates to request loans totalling $350 million. According to reports, the federal government requires these loans to meet external financing needs.

Finance Minister Muhammad Aurangzeb has been holding talks with the UAE’s commercial banks in efforts to resume their lending to Pakistan. Analysts believe that the loan package may be finalised soon, providing the economy with some fiscal breathing room.

In the first nine months of fiscal year (FY) 2024-25, foreign creditors provided Islamabad with approximately $504 million, with a number of the lenders based in the UAE. This has reportedly subsided fears foreign commercial banks had and kept them away from providing Pakistan with loans.

Lately, Pakistan has greatly improved its banking outlook along with most of its macroeconomic indicators. The Finance Minister outlined Pakistan’s accomplishment of meeting quantitative targets set by the International Monetary Fund (IMF) while highlighting how the renowned credit rating agency, Fitch, improved Pakistan’s credit rating.

Aside from Fitch, another credit rating agency, Moody’s, also upgraded Pakistan’s rating, reflecting rising market confidence in the country’s ability to pay back its liabilities. Commercial banks prefer lending to countries with a low risk of default as it is a safer option with steady returns on issued debt.

The Ministry of Finance has revealed that it engaged with three UAE-based banks, namely Abu Dhabi Islamic Bank, Ajman Bank and Sharjah Islamic Bank. As per reports, these meetings were held virtually and revolved around the aforementioned banks’ support for Islamabad’s fiscal and developmental goals.

The finance minister was at the helm of the discussions and even engaged with members of a team from Standard Chartered Bank. Reports suggest that he expressed gratitude to both Dubai Islamic Bank and Standard Charte­red Bank for identifying Ajman and Sharjah Islamic Banks as potential lenders.

Reports indicate that the Asian Develop­ment Bank (ADB) is willing to back the loans totalling $350 million with its guarantees, greatly reducing the risk of the UAE’s banks lending to Pakistan. In the event that Pakistan defaults on these specific loans, ADB may have to repay the banks with its own resources. 

As per reports, the Finance Minister outlined the government’s commitment to long-term reforms, including active privatisation efforts and rightsizing of the government.

The federal government, following discussions with the International Monetary Fund (IMF), has reached an agreement with the creditor to increase the domestic Petroleum Development Levy (PDL) to over Rs100 per litre. According to reports, the international lender expects Pakistan to make this change in fiscal year (FY) 2025-26.

Reports indicate that proceeds from the PDL will be directed towards power sector subsidies and payments to reduce the country’s ballooning circular debt. This will result in a massive hike in the PDL, which is Rs78 per litre and Rs77 per litre for petrol and diesel, respectively.

Reports reveal that the hiking of the PDL is in line with the federal government’s initiatives as lawmakers intend to fund electric vehicle and power subsidies via proceeds from non-tax revenues. Moreover, it is part of the IMF’s Extended Fund Facility Program, and if followed correctly, it will allow Islamabad to greatly consolidate its fiscal position.

This move may pave the way for Pakistan to curb fuel imports, reducing the current trade deficit. However, many analysts believe that the demand for fuel is inelastic, resulting in only a minor drop in domestic consumption of the commodity – this could allow for a significant boost in government revenues.   

The PDL has recently witnessed a series of increments, rising from Rs60 per litre in July 2024 to its current high of Rs80 per litre. According to reports, this Rs20 rupee hike, spread out over 10 months, resulted in the government obtaining an additional Rs1 trillion in revenue.

Islamabad had initially planned to bring in a whopping Rs1.281 trillion via the levy by the end of the FY. Moreover, the levies on fuel are not limited to the PDL as the government intends to impose a carbon levy on petrol and diesel, standing at Rs5 per litre.  

Reports suggest that the government intends to abolish the ceiling on the Debt Service Surchage (DSS) on power bills by the end of FY 2024-25. The ceiling stands at 10 percent, and if removed, may greatly alleviate the cash-strapped nation’s rising circular debt stock.

To counter the circular debt problem, the government intends to pass fuel cost pass-throughs and regular tariff adjustments onto users of the national grid. This could result in the general public facing higher power bills, thereby reducing household purchasing power.

In a bid to support industrialisation efforts and export revenues, Prime Minister (PM) Shehbaz Sharif has decided to implement the National Tariff Policy by forming a senior advisory committee. According to reports, the tariff policy is to be implemented over a period of five years and is expected to significantly improve the domestic economy.

Reports indicate that the committee will include 10 senior officials, with Finance Minister Muhammad Aurangzeb at the helm. Notable figures on the committee include the ministers for Railways, National Food Security & Research, Commerce, and Petroleum.

Furthermore, renowned economist Dr Ijaz Nabi, along with former bureaucrats Dr Robina Athar and Manzoor Ahmed, are also part of the committee. The inclusion of economic experts along with bureaucrats may result in the committee gaining a wider array of perspectives as opposed to one entirely composed of lawmakers alone.

As per the notification, the committee is primarily responsible for leveraging tariffs to grow exports, come up with support schemes and outline different sectors that will be affected because of a revision in tariffs, among other duties.

Other responsibilities include providing oversight to the policy’s implementation, along with studying the economic figures associated with tariffs. Moreover, reports indicate that the committee will also attempt to bring in foreign direct investment inflows while simultaneously focusing on creating a surplus in the supply of industrial products.

While the surplus may not clear in the domestic market, experts believe that it could allow for a boost in exports, thereby generating export revenues for cash-strapped Pakistan.  This spells great news for the country as it has historically relied on remittances to stop the current account deficit from growing too large, a phenomenon caused by the country’s persistent trade deficits.

Reports reveal that the Ministry of Commerce (MoCOM) will have the authority to induct members onto the committee. The MoCOM has also been tasked with extending secretarial support to the committee upon request. 

PM Shehbaz has authorised a sizable drop in tariffs on imports, which could attract investments while boosting exports, as per details from an official announcement. He announced his intentions to create employment avenues by improving the economy.

Reports suggest that PM Shebaz has also implemented a 15 percent upper limit on customs duty, a move that could provide importers relief. Moreover, he waived off additional customs duty entirely, which can be as high as seven percent, along with regulatory duties, which can be as high as 90 percent. 

However, these reductions in tariffs and duties are to be implemented in phases. As per reports, it will take four to five years for importers to experience the full extent of tariff reductions.

In a bid to oppose the proposed Petroleum (Amendment) Act 2025, the All Pakistan Petroleum Dealers Association (APPDA) has claimed that the proposed amendment could detrimentally affect the business operations of upstanding petroleum retailers. The amendment in question aims to crack down on fuel smuggling and adulteration tactics; however, the APPDA suggests that it could result in a disruption of the energy supply chain.

Earlier this week, Islamabad decided to introduce the bill in the National Assembly in an attempt to digitally track etroleum products in various stages of the production process. According to reports, officials intended to introduce tracking mechanisms from import and production to retail sales.

The introduction of the clauses to the amendment means that if passed, they will grant government officials, such as deputy and assistant commissioners, along with a handful of other officers, the power to confiscate fuel, machinery and the equipment of fuel vendors who are not abiding by the law.

However, interviews with reputable reporting institutions have revealed their fears surrounding the vesting of such sweeping powers in government officials. According to pump owners, the devolution of such power to administrators, coupled with the lack of regulatory checks and oversight, is likely to result in unfair outcomes for them.

As per reports, pump owners feel that the proposed amendment creates an environment wherein they will be exposed to coercion simply for authorities to reach their “enforcement targets”. Moreover, an owner also logged their resentment in an interview, reiterating how they have collectively poured billions into investment across the country. 

However, the federal government has reasons to propose the amendment. Reports indicate that an estimated 10 million litres of Iranian diesel and petrol are smuggled into the country, detrimentally impacting the national exchequer, as smuggled petroleum evades taxes and duties. 

This phenomenon results in the national exchequer losing out on a staggering Rs300 to Rs500 in annual tax revenue. Moreover, smuggled petroleum evades taxes and duties, allowing for the generation of supernormal profits for all those involved in the malpractice.

If implemented with integrity, the amendment will actually shield pump owners complying with the law. This is because ensuring that every entity is subject to the same rules will reduce the upside of not cooperating with the law, as the opportunity to generate supernormal profits by engaging in illegal activities will not seem as attractive given the possibility of facing a fine.

Amid widespread Indian boycotts over Türkiye’s support for Pakistan during last week’s military clashes, the business community in Pakistan has rushed to aid the West Asian nation.

According to sources in the Federation of Pakistan Chamber of Commerce & Industries (FPCCI), the body’s acting president has said that the volume of raw material and other imports from Türkiye to Pakistan should immediately be increased.

The federation has also called on the business community to express “more than usual” support for Türkiye as India trains its guns on the country for honouring its commitments to, and expressing support for, Pakistan.

Turkish President Recep Tayyip Erdogan has also made an unequivocal declaration of support for the Pakistani people amid heightened regional tensions. “I once again congratulate our Pakistani brothers on their patience, resilience and wise approach,” he said during a cabinet meeting following the ceasefire as a result of Pakistani military’s befitting response to cross-border Indian aggression.

“God willing, Türkiye will continue to stand with the brotherly Pakistani nation in both good and difficult times,” President Erdogan said, which did not sit well with Indians who have since issued calls for the public to boycott Turkey.

The boycott gained momentum after reports emerged of Turkish drones being used by Pakistan against India.

According to reports, India has also barred Turkish firm Celebi from operating at its airports, citing national security concerns — an allegation the company denies. Several Indian universities, including Jawaharlal Nehru University, Jamia Millia Islamia and Maulana Azad National Urdu University, have also suspended academic ties with Turkish institutions.

“Every hardworking Indian who travels abroad as a tourist understands today that their hard-earned rupee should not be spent on those who help the enemies of our country,” said Rajeev Chandrasekhar, a former federal minister and a member of PM Narendra Modi’s Bharatiya Janata Party (BJP).

The social media boycott calls had an immediate impact, with Indian travel sites reporting a sharp spike in cancellations this week.

According to official data, 330,100 Indians visited Turkey in 2024, up from 274,000 in 2023. Despite rising numbers, Indians made up for less than one percent of Turkey’s foreign visitors in 2024 — a modest share with limited impact on overall tourism revenue.