In its latest World Economic Outlook Update, the International Monetary Fund (IMF) has projected Pakistan’s GDP growth at 3.6% for the fiscal year FY2024-25—below the government’s ambitious target of 4.2%. The IMF’s unchanged forecast underscores concerns around structural weaknesses, debt reliance, and economic uncertainty despite reported improvements in some macroeconomic indicators.
The federal government had previously forecasted stronger growth driven by expected recoveries in the agriculture and industrial sectors. However, independent economists and global institutions such as the World Bank have painted a more sobering picture, noting that nearly 45% of Pakistan’s population lives in poverty. Official poverty and unemployment data remains outdated, with the Pakistan Bureau of Statistics (PBS) expected to release updates, including the latest Agriculture Census, in the coming months.
Foreign Diplomats Briefed on Economic Reforms
Coinciding with the IMF’s projection, top federal ministers briefed diplomats from countries including the US, UK, EU, Japan, Saudi Arabia, and Germany, highlighting efforts to attract foreign direct investment (FDI) and improve fiscal stability. However, diplomats raised pointed concerns over:
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High borrowing costs
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Increasing commercial debt
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Unclear tax policies
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Long-term sustainability of reforms
Finance Minister of State Bilal Azhar Kayani and Power Minister Sardar Awais Ahmad Khan Leghari has led the session. According to a Finance Ministry press release, the government presented a case for shifting from economic “stabilisation” to sustained reform, citing improved indicators.
Macroeconomic Indicators: Mixed Signals
Kayani cited a 2.7% GDP growth in FY2025 and claimed per capita income had grown by 10% to $1,824—although this figure is based on outdated population estimates, making its accuracy questionable.
The government also reported:
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3.1% primary surplus—the highest in 20 years
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Inflation at 4.5%, a 9-year low
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Interest rates halved, from 22% to 11%
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Debt-to-GDP ratio reduced to 69%
Officials celebrated a $2.1 billion current account surplus, the first in 14 years, claiming it showed economic resilience. This surplus was attributed to improved exports, remittances, FDI, and stable foreign reserves ($14.5 billion+).
However, impartial observers view issues. For example, the State Bank of Pakistan (SBP) has bought $7.3 billion from the local market between July and April, which expert said that it artificially supported the rupee. That amount is greater than IMF bailout of Pakistan over three years the least, challenging government claim on reduced foreign borrowing reliance.
Credit Ratings and Debt Strategy
Pakistan has received positive credit outlooks from two rating agencies, with S&P upgrading Pakistan to ‘B negative’. Moody’s is also expected to improve its rating. Nonetheless, diplomats queried the government’s high external debt servicing costs and whether the strategies formulated with the IMF and World Bank are sustainable over the long term.
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The Energy Sector: Debt and Reforms
Power Minister Leghari outlined ongoing reforms in the power sector, a long-standing source of fiscal stress. Pakistan’s circular debt stands at Rs2.4 trillion, and the government has borrowed Rs1.25 trillion from commercial banks to manage it. This debt will be repaid via a Rs3.24/unit electricity surcharge, shifting the burden to consumers.
Leghari admitted this approach poses risks, citing structural issues like:
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Inefficient tariffs
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Unaffordable electricity rates
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Operational losses in distribution companies
Reforms include:
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Tariff rationalisation
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Infrastructure upgrades
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Improved governance
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Privatisation of DISCOs (3 targeted for 2026)
Leghari urged foreign investors to tap into the $2-3 billion potential in renewable energy, grid modernization, and energy services.
FBR Transformation and Tax Reforms
Chairman FBR Rashid Langrial briefed attendees on the FBR Transformation Plan, which focuses on:
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People
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Processes
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Technology
He claimed:
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46% growth in real tax collection due to better enforcement
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Tax-to-GDP ratio rose to 10.24% (from 8.8%)
Yet, Pakistan still missed its IMF revenue target by 0.3% of GDP, despite record taxation. This indicates lingering inefficiencies and gaps in tax collection, particularly among large taxpayers and the informal economy.
Looking Ahead
While the government is eager to highlight recent progress, the economic outlook remains fragile. The IMF’s conservative growth forecast suggests global stakeholders remain cautious about Pakistan’s ability to sustain reforms amid:
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Outdated statistics
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Mounting debt
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Structural inefficiencies
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Political and energy sector risks
Until deeper institutional reforms and data transparency are achieved, skepticism from both international lenders and domestic analysts is likely to persist.
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