Pakistan’s economic momentum remained steady throughout Financial Year 2025 (FY25), with real GDP growing by 2.68%. The Ministry of Finance’s latest Monthly Economic Outlook anticipates inflation to remain within 3% to 4% for June 2025.
The report highlights significant improvements in Pakistan’s fiscal and external positions during FY25. The current account registered a surplus of $1.81 billion, the fiscal deficit narrowed, and the primary balance achieved a surplus of 3.2% of GDP during the July–April period.
These gains have been bolstered by the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF), which have enhanced policy credibility and investor sentiment amidst ongoing stabilization efforts.
Remittances, Exports, and Imports
Over the first 11 months of FY25, workers’ remittances, exports, and imports showed upward trends. Workers’ remittances surged by 28.8%, climbing from $27 billion in FY24 to nearly $35 billion in the current year. This growth in inflows contributed to a return to a current account surplus, supporting exchange rate stability and reserve accumulation.
Exports saw annual growth, although a monthly decline was recorded. In May 2025, exports stood at $2.4 billion, down from over $3 billion in May 2024. Imports, conversely, grew by 11.5% during the same period, reflecting increased demand for capital and intermediate goods as industrial activity stabilized.
Despite these positive indicators, foreign direct investment declined by 14.4% year-on-year, underscoring continued investor caution amidst global uncertainty and local structural challenges.
Fiscal and Inflationary Outlook
The fiscal outlook presented an improved picture, with FBR revenues increasing by 25.9% and non-tax income seeing a substantial 68.1% rise. This strong fiscal performance, underpinned by reforms under the IMF program, facilitated a reduction in the overall deficit and helped maintain a primary surplus.
The Ministry reported that external inflows and administrative measures supported the accumulation of foreign exchange reserves, even as the rupee depreciated by Rs5.03 compared to the previous fiscal year.
Inflation during the July–May period was recorded at 4.6%, indicating continued disinflation, particularly in food and energy prices. With improved inflation expectations, the central bank significantly reduced the policy rate from 20.5% to 11%—a cumulative cut of 950 basis points. This policy easing is expected to support credit expansion, revive private sector activity, and stimulate growth in the coming quarters.
Challenges and Outlook
Despite the broader economic recovery, large-scale manufacturing output experienced a 1.52% decline in the fiscal year to date. The Ministry acknowledged that while several industrial segments have shown resilience, persistent structural bottlenecks, energy constraints, and elevated input costs continue to exert pressure on overall output.
