Blog

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.