Pakistan economy gets macroeconomic stability

KARACHI: Pakistan’s economy has achieved macroeconomic stability in FY25, recovering from the challenges emerged in FY23, and restoring economic confidence alongside favourable economic outlook. However, continued reforms and external support is crucial to maintain this recovery.

According to Pakistan Economic Survey for the fiscal year 2025 (FY25) released on Monday, Pakistan has emerged from the economic turbulence of FY23, driven by easing inflation, improved external balance and fiscal discipline. “Improved macroeconomic indicators including easing inflationary pressures, a stronger external account position along with fiscal consolidation have contributed to renewed economic confidence and a more favourable economic outlook.”

Inflation is expected to remain within the medium-term target range of 5-7 percent in coming years, reinforcing the effectiveness of recent policy measures about anchoring expectations and supporting recovery.

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However, the survey noted that nonetheless, the sustainability of this recovery hinges on the continued implementation of sound, well-coordinated economic policies.

Government is cognisant of the fact that ensuring price stability and fostering broad based growth will require a conducive business environment for investment and job creation, timely and adequate external inflows to meet financing needs, and resilience in the external sector, it added.

According to Economic Survey, the domestic economic recovery which started in FY 2024 continued in FY25, mainly due to the government’s proactive measures tailored to address economic challenges and foster a conducive environment for sustained growth.

Consequently, inflation decreased significantly, foreign exchange reserves increased, and the exchange rate stabilised. The positive momentum has been supported by sound macroeconomic management, with improved fiscal & external balance and effective measures to control inflation.

Pakistan’s monetary policy during July-May FY25 marked a cautious pivot toward easing, amid global and domestic evolving environment. A notable disinflationary trend persisted from the beginning of the current fiscal year, driven by declining food and energy prices, improved domestic supply chains, and a relatively stable exchange rate.

Inflation reached an all-time low of 0.3 percent in April, and with inflation easing alongside steadier domestic and external conditions, allowing State Bank of Pakistan (SBP) to adopt an accommodative policy stance.

With a sharper-than-anticipated decline in headline inflation driven by energy tariff adjustments, softening food prices, and a favourable base effect, the MPC resumed easing in May 2024 with a further 100 basis point cut. This brought the total reduction to 950 basis points for FY25 (Jul-May) and 1100 basis points since the start of the easing cycle in June 2024.

The banking sector of Pakistan also exhibited a steady performance that is reflected in the key financial soundness indicators related to capital adequacy, earnings, and asset quality. Assets base of the sector grew by 15.8 percent YoY in CY2024 to reach Rs 53.7 trillion by end December-2024.

Copyright Business Recorder, 2025