EDITORIAL: During a press conference the Information Minister Ata Tarar and the Interior Minister Mohsin Naqvi maintained that the economy is on a steady trajectory towards stability and growth with international financial institutions acknowledging that stability has been achieved. There is no doubt that the indicators cited by the two ministers do symbolise stability and growth.
Foreign exchange reserves are at a high of USD 16,055.7 million as of 2 January 2026, the highest since 21 January 2022 when reserves held by the State Bank of Pakistan rose to USD 16,190.1 million, yet the source of these reserves are over USD 12 billion rollovers by the three friendly countries (China, Saudi Arabia and the United Arab Emirates) and the remaining is attributable to loans from multilaterals (apart from the USD 7 billion ongoing 36-month programme loan from the International Monetary Fund) as well as other bilaterals. Be that as it may, donor agencies generally regard the rise in reserves as indicative of stability, reserves that their own lending programmes contribute towards.
In this context, it is relevant to note that two of the three international rating agencies improved the country’s rating last year — a rise usually associated with being on an IMF programme as that provides a comfort level with respect to the reform agenda agreed with the authorities leading to a receding default risk.
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However, it is relevant to note that neither rating agency has placed Pakistan in the investment category, which Pakistan has never-ever attained, but kept the country in the speculative grade category indicative of high risk and higher borrowing costs from the commercial banking sector abroad. Two observations are critical.
First, if the country is no longer on the IMF programme — in case the Fund does not approve the next tranche release due to failure to implement the agreed conditions or due to the government abandoning the programme mid-way — the rollovers by the friendly countries for next fiscal year are unlikely.
And second, foreign investment inflows in July-November 2025 declined to USD 313.7 million (USD 927.4 million foreign direct investment and negative USD 613.8 million portfolio investment) against USD 1,391.1 million in the same period last fiscal year (USD 1,242.4 million foreign direct investment and USD 148.7 million portfolio investment).
Remittances have outperformed each month in the current fiscal year (July-December 2025) compared to the same period of last year with total inflows amounting to USD 19.7 billion; however, this does not take account of the rise in the trade deficit in the first half of the current year — USD 19,204 million — as opposed to USD 14,271 million in the comparable period of the year before. In other words, the gains made in remittances have been absorbed by the higher trade deficit.
There is no doubt that Gross Domestic Product growth has increased in the past year or two but given the implementation of the extremely contractionary monetary policy (in spite of the more than halving of the discount rate to 10.5 percent from 22 percent it remains above the regional average of 5 to 6 percent accounting for large-scale manufacturing sector showing sustained poor performance) and fiscal policy (with the focus on audit that has compelled many a taxpayer to seek remedial measures with talks ongoing with the Federal Board of Revenue) growth is mainly attributed to the low base of previous years rather than a rise in output.
Floods this year compromised the growth of the farm sector though details have not yet been released.
Inflation continues to be a source of concern to the 93 percent of those employed in the private sector due to no pay raises for the past six to seven years, reflecting poor growth — a condition not experienced by the 7 percent employed by the state as the government has raised their salary above the rate of inflation each year.
This is not the time for complacency and one would hope for a more informed narrative from cabinet members rather than to parrot achievements that are not visible or experienced by the general public.
Copyright Business Recorder, 2026
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