EDITORIAL: In a statement issued by his office Prime Minister Shehbaz Sharif expressed great satisfaction over the stock market index surpassing 148,000 points, a historic high, and thanked the business community for their continued confidence in government policies though he added that while “the nation is on the path of development further efforts are still needed.”
There is no doubt that apart from the stock exchange performance the current account deficit has performed well and plunged by 27 percent in July 2025 but is still an improvement when compared to July 2024 — and even more praiseworthy was the USD 2.1 billion surplus for July-June 2025.
Inflation too has declined dramatically — from 28.31 percent in 2023-24 to 11.09 percent in 2024-25 as per data uploaded on the State Bank of Pakistan website.
As noted by the Prime Minister, there is no doubt that further efforts are still needed on all counts. The plunge in the current account last month is partly attributable to a rise in the trade deficit — from USD 22.177 billion in 2023-24 to USD 26.785 billion in 2024-25 with the July 2025 deficit at negative USD 2.679 billion against negative USD 2.488 billion in July 2024.
The decline in exports is mirrored by a rise in negativity of the large-scale manufacturing sector in 2024-25 (1.21 percent) and though credit to the private sector rose to 741.3 billion rupees against 527.3 billion rupees the year before yet reports indicate that the rise was mainly channeled into speculative investment on the stock market rather than in industry.
Pakistan’s stock market, with relatively a small number of key players compared to India’s, is taxed at a low rate evident from the 15 billion rupees per annum revenue collected from this source as opposed to over a 100 billion rupees in India.
The stock market index has been consistently used by successive governments as an indicator of improved economic performance; however, this claim is easily refuted as those who deal in stocks and shares are not the general public and certainly not the poor and vulnerable. This is reflected by the fact that poverty levels in Pakistan today are a high of 44.7 percent as per the World Bank. Furthermore, the number of entities listed on the bourse are just a fraction of the total number of business entities and employers in the country.
Remittances rose dramatically, by nearly USD 8.299 billion, and are the main reason for the current account surplus last year. This has to be sustained in the current year and the July figures show this trend continuing — from USD 2,994 million in July 2024 to USD 3,214.4 million last month though geo-political considerations may make this a challenge in months to come.
The business community has been increasingly vocal about the cessation of fiscal and monetary incentives in this year’s budget as an International Monetary Fund (IMF) programme loan’s key condition with discussions underway between the government and the community that have yet to reach a successful conclusion. Tax on traders was deferred last fiscal year on the threat of countrywide strikes, again as per an IMF condition; however, it is unclear as to how long the government will be able to resist the Fund on this count.
And finally, it is relevant to note that while the foreign exchange reserves situation has improved markedly — to USD 14,243.2 million on 8 August 2025 from USD 9,153.3 million on 2 August 2024 — yet given that the rollovers from friendly countries alone are USD 16 billion, requiring a yearly request to roll over till the IMF programme duration which is scheduled to end on 15 September 2027, the situation is far from satisfactory.
The best option is to cut current expenditure that would automatically reduce the pressure to raise taxes that have a negative impact on domestic output; however, while the cabinet continues to rhetorically claim that wasteful expenditure is being cut yet this claim is simply not backed by data released by government agencies so far.
Copyright Business Recorder, 2025
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