KARACHI: The State Bank of Pakistan (SBP) yesterday reported improved macroeconomic stability in FY25, crediting prudent monetary policy, fiscal consolidation, and support from the IMF’s Extended Fund Facility (EFF). These measures, coupled with favourable global commodity prices, contributed to overall economic progress.
The SBP’s *Annual Report on the State of Pakistan’s Economy* noted that real GDP growth edged higher, led by the services sector and a moderate recovery in industrial activity, despite setbacks in major crops and a decline in large-scale manufacturing. With rising economic activity, imports increased, but export growth remained weak due to soft global food prices, geopolitical tensions, and global trade uncertainty.
However, the report highlighted a major positive shift: a surge in workers’ remittances that outpaced the widening trade deficit, resulting in a notable current account surplus. This, along with increased external inflows, helped stabilise the foreign exchange market and boosted SBP’s reserves.
Pakistan’s fiscal deficit fell to a nine-year low, driven by fiscal discipline and a significant rise in SBP profits. A primary budget surplus exceeded targets for the second year running.
Inflation fell sharply from 23.4% in FY24 to an eight-year low of 4.5% in FY25, aided by stable exchange rates, food supply stability, falling global commodity prices, and energy sector reforms. This allowed the Monetary Policy Committee to slash the policy rate by 1,100 basis points over the fiscal year.
Despite these gains, the SBP flagged structural issues hampering growth, particularly Pakistan’s low savings rate. A special chapter in the report outlined factors such as low per capita income, high inflation, informal economy, and fiscal imbalances as barriers to savings and investment.
The report also cited climate events, political instability, high taxes, and regulatory hurdles as ongoing risks to investment.
Nonetheless, confidence among businesses and households has improved. Pakistan’s stable macroeconomic outlook, policy reforms, and progress under the IMF program led to upgraded credit ratings from major international agencies between April and August 2025.
