Dr. Ikramul Haq & Abdul Rauf Shakoori
Pakistan, a resilient nation of over 240 million people, has long been associated with accounts of struggle and determination. While the country faces economic, social, and political challenges, its capacity to make progress under such circumstances is both incredible and inspiring. The recent developments in monetary policy, fiscal management, and key economic indicators reflect a nation striving relentlessly to overcome hurdles and build a prosperous future.
The State Bank of Pakistan (SBP) has been proactive in adjusting monetary policy to stabilize the economy. The Monetary Policy Committee (MPC) recently announced a cumulative reduction in the policy rate by 900 basis points since June 2024, bringing it down to 13%. This decision was driven by a decline in inflation, which fell to 4.1% in December 2024 from 4.9% in November. Such measures aim to reduce borrowing costs, stimulate economic activity, and create an environment conducive to growth. This move emphasizes SBP’s commitment to fostering an economic environment that encourages investment and consumer confidence, both of which are essential for sustainable growth.
The commercial banks have borrowed substantial amounts to manage liquidity recently securing Rs. 9.61 trillion from SBP, the overall trend indicates an improvement in fiscal discipline. These borrowings often help finance federal and provincial governments, bridging fiscal deficits without directly burdening the central bank. SBP’s cautious approach to monetary policy reflects its commitment to long-term economic stability, even as global economic uncertainties loom large. By addressing liquidity shortages in a measured manner, the central bank ensures that financial institutions remain solvent and capable of supporting businesses and individuals.
Inflation, a perennial concern for Pakistan, has shown a significant downward trend. This decline is a testament to effective fiscal policies and prudent monetary management. As inflationary pressures ease, the purchasing power of ordinary citizens improves, offering a reprieve to households and businesses alike. The government’s efforts to manage domestic borrowing through commercial banks, rather than direct central bank loans, highlight a commitment to fiscal discipline and adherence to international financial norms. These efforts strengthen investor confidence and demonstrate a strategic approach to managing the nation’s fiscal health.
Pakistan’s energy sector has long been a critical focus area, and recent initiatives demonstrate progress. The Economic Coordination Committee (ECC) has approved measures to increase gas tariffs for industrial consumers while protecting domestic users from additional financial burdens. Such decisions aim to ensure the sustainability of the energy sector while balancing the needs of various stakeholders. Therefore, addressing the financial needs of the energy sector is key to maintaining an uninterrupted power supply, which is important for industrial growth and economic productivity.
The Power Division has undertaken initiatives to enhance efficiency and transparency, including the installation of smart meters at distribution transformers. These measures are expected to optimize load management, reduce losses, and improve service delivery. Collaborations with international institutions like the World Bank further strengthen these efforts, ensuring that reforms are not only effective but also sustainable. By implementing smart technology, Pakistan can address inefficiencies and modernize its energy infrastructure, paving the way for long-term economic benefits.
The industrial sector, a cornerstone of Pakistan’s economy, has witnessed a 7% increase in power consumption in December 2024 compared to the previous year. This growth reflects a robust appetite for expansion and investment, driven by initiatives such as the “Bijli Sahulat Package”. Such measures provide industries with affordable electricity, enabling them to enhance productivity and competitiveness. A thriving industrial sector not only boosts economic output but also creates employment opportunities, contributing to overall socio-economic development.
The legislative reforms, including amendments to trade and import and export regulations, aim to streamline operations and foster a business-friendly environment. By extending the tenure of chambers of commerce and enabling one-time relaxations for import and export restrictions, the government has demonstrated its commitment to supporting the business community and driving economic growth. These legislative changes provide businesses with the flexibility they need to explore complex global markets and capitalize on emerging opportunities.
Pakistan’s focus to make international trade and investment persistent, the legislative measures to address hardship cases in import and export activities have been introduced, ensuring administrative efficiency and fostering investor confidence. The government’s engagement with international partners, including the World Bank and the International Monetary Fund (IMF), highlights its commitment to integrating with the global economy. Therefore, improving trade ties and attracting foreign direct investment are essential for diversifying the economy and reducing reliance on external borrowing.
While challenges such as rising pressures persist, the government’s efforts to maintain currency stability and encourage remittance inflows have yielded positive results. These measures not only support foreign exchange reserves but also mitigate potential economic shocks. The consistent flow of remittances from overseas Pakistanis provides a critical buffer against external economic pressures and contributes to the country’s financial stability.
In recent months, the Parliament has passed critical legislation to address pressing economic and administrative challenges. Laws such as the Trade Organizations (Amendment) Bill 2021, and the Imports and Exports Regulation (Amendment) Bill 2023, aim to streamline trade operations and enhance governance. These legislative efforts reflect a government willing to adapt and evolve to meet the needs of a dynamic global economy. Moreover, effective governance is a cornerstone of economic progress, and these legal frameworks lay the foundation for more efficient and transparent administrative processes.
As a developing country, Pakistan is not immune to global economic headwinds. The rising oil import costs and fluctuating international commodity prices pose challenges to the balance of payments. However, strategic measures, such as leveraging dollarized financing under FE-25 loans and fostering remittance growth during peak seasons, have helped stabilize the currency and manage external pressures. The government’s ability to adapt to shifting economic conditions ensures that the nation remains resilient in the face of adversity.
The government’s proactive approach to engaging with stakeholders, including treasury officials and international partners, ensures that policy decisions are informed and effective. By maintaining a cautious yet forward-looking monetary stance, Pakistan has positioned itself to cross global uncertainties while fostering domestic resilience. This approach reflects a deep understanding of the interconnectedness of global and local economic factors, ensuring that policies are both realistic and impactful.
Despite these challenges, Pakistan’s path offers reasons for optimism. The country’s emphasis on sustainable development, social equity, and economic resilience is evident in its policy decisions and reform initiatives. From energy sector advancements to industrial growth and fiscal stability, Pakistan is laying the groundwork for a brighter future. By prioritizing sustainable practices and inclusive policies, the nation is building a robust foundation for long-term prosperity.
The road ahead is undoubtedly fraught with obstacles, but Pakistan’s resilience and determination remain its greatest assets. As the nation continues to implement structural reforms, foster international partnerships, and empower its people, it moves closer to realizing its potential as a stable and progressive economy. Pakistan can overcome its challenges and achieve sustainable growth that benefits all segments of society with strategic planning and unwavering commitment,
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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, and cyber laws, ML/CFT, IT, intellectual property, arbitration, and international taxation. He holds an LLD in tax law with a specialization in transfer pricing. He was a full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner.
He studied journalism, English literature, and law. He is the Chief Editor of Taxation. He is the country editor and correspondent of the International Bureau of Fiscal Documentation (IBFD) and a member of the International Fiscal Association (IFA). He is a Visiting Faculty at the Lahore University of Management Sciences (LUMS) and member Advisory Board and a Visiting Senior Fellow of the Pakistan Institute of Development Economics (PIDE).
He has co-authored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (Revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law, Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is the author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, and its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal). He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines, and newspapers at home and abroad.
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime, and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies, and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, and cross-border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career, he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and has also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study-driven scenarios and exams to ensure knowledge transfer.
His notable publications are Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan Rauf’s Research on Labour Laws and Income Tax, and others.
His articles include Revenue Collection: Contemporary Targets vs. Orthodox Approach, It is Time to say goodbye to Our Past, US Double Standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly listed Pakistan, Corruption is No Excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF Secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge,.
The recent publication, coauthored with Huzaima Bukhari, is
Pakistan Tackling FATF: Challenges & Solutions
available at:
https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35
https://www.amazon.com/dp/B08RXH8W46