Dr. Ikramul Haq & Abdul Rauf Shakoori
The present government has demonstrated a committed and focused approach to economic stabilization, reflected in a series of structured reforms and prudent macroeconomic policies. The approval and successful implementation of the International Monetary Fund’s Extended Fund Facility (EFF) programme has played a catalytic role in underpinning these efforts, providing both credibility and confidence to international partners and domestic markets.
The fiscal consolidation pursued over the past months has resulted in the lowest budget deficit since fiscal year (FY) 2005, reflecting departure from perpetual fiscal indiscipline.
The headline inflation, plaguing the economy with double-digit volatility over the preceding years, fell sharply to a multi-decade low of just 0.7 percent by March 2025. The tightening of monetary policy, complemented by fiscal restraint and improvement in domestic supply chains, played a critical role in controlling inflation.
The State Bank of Pakistan (SBP) adopted a calibrated approach to monetary easing once the inflation outlook began to stabilize. The reduction of the policy rate by a massive 1000 basis points between June 2024 and February 2025 marked a significant turning point in the monetary environment. The resultant easing in financial conditions led to a marked uptick in private sector borrowing and investment activity, with bank credit to the private sector expanding considerably in the first half of FY2025. The improved liquidity environment encouraged business expansion, especially in export-oriented sectors, which are now experiencing a revival after years of stagnation.
The current account balance witnessed a remarkable turnaround, posting a surplus after prolonged deficits. The increase in workers’ remittances and exports outweighed the modest rise in imports, reflecting both improved global demand for Pakistani goods and services as well as enhanced competitiveness driven by exchange rate stability.
The forex reserves of the SBP were further bolstered by the disbursement of the first tranche under the IMF programme, alongside increased private inflows and continued support from multilateral institutions. The improved reserves buffer not only strengthened the external position but also stabilized the exchange rate, contributing to lower imported inflation.
The sovereign credit rating upgrades by Fitch and other agencies served as external validation of the improving macroeconomic fundamentals. The Finance Minister’s engagements with leading rating agencies, development partners, and multinational corporations during the IMF–World Bank Spring Meetings reinforced investor confidence in Pakistan’s reform initiatives. The sustained reforms in taxation, energy, privatization, and public finance were highlighted as structural anchors of the country’s long-term stability.
The privatization agenda gained momentum as the government-initiated efforts to restructure and divest loss-making state-owned enterprises. The restructuring of Pakistan International Airlines and Pakistan Steel Mills, as well as the exploration of public-private partnerships in energy and transport, signaled the government’s resolve to reduce fiscal drag and improve public sector efficiency. The successful progress on these fronts was presented to institutional investors as part of Pakistan’s bid to re-enter international capital markets with instruments like Panda Bonds and ESG-linked financing.
The government’s proactive diplomacy in securing support from China, Saudi Arabia, UAE, and multilateral lenders ensured steady external funding flows and enabled strategic investments in energy and infrastructure. The Finance Minister’s meetings with global corporations such as VISA and Philip Morris underscored the growing trust in Pakistan’s policy direction, with commitments for expansion and localization of operations.
The adoption of digital technologies to drive governance reform was visible in the rollout of the National Freelance Portal, new payment gateways, and end-to-end digitization of revenue systems. The government also pushed ahead with a regulatory framework for crypto-assets, engaging international DeFi platforms like World Liberty Financial and aligning with major crypto infrastructure players to explore stablecoin-backed remittance corridors and digital asset tokenization. The engagement of high-profile advisors and the planned rollout of sandbox environments for blockchain innovation positioned Pakistan as a future-ready economy.
The strategic management of inflation not only reflected successful macroeconomic handling but also enabled better targeting of social safety nets. The expansion of the Benazir Income Support Program, free ration and flour distribution, and targeted energy subsidies shielded vulnerable households from residual cost pressures. The reorientation of fiscal support from universal subsidies toward need-based transfers marked a paradigm shift in social protection philosophy, with implications for both fiscal efficiency and equity.
The real GDP growth, though modest in the range of 2.5 to 3.5 percent, was achieved without compromising external stability or fiscal responsibility. The agricultural sector faced production setbacks due to weather and input constraints, but the services sector showed resilience, with digital platforms and logistics services leading the rebound. The industrial sector also showed signs of bottoming out, with small-scale manufacturing and utilities providing stability against contraction in large-scale segments.
The government’s commitment to environmental sustainability was articulated through its Climate Prosperity Plan and collaboration with the World Bank on a green taxonomy. The efforts to align sovereign financing with Sustainable Development Goals were demonstrated in the preparation for green bonds, sukuks, and SDG-linked budget reporting.
The improving investment climate was also reflected in the growing interest of multinational banks like Standard Chartered and Deutsche Bank in facilitating Pakistan’s access to global markets. The launch of the Roshan Digital Account and its enhanced functionalities attracted record diaspora inflows, strengthening the forex position while deepening financial inclusion.
The strategic focus on attracting overseas Pakistanis to participate in national development through bonds and real estate schemes reflects a pragmatic approach to leveraging remittances for productive use.
The ongoing efforts to reduce the circular debt and improve cost recovery in the energy sector contributed to fiscal consolidation, with fewer off-budget liabilities accumulating. The negotiations with independent power producers and gradual adjustment of energy prices in line with global trends ensured that the energy transition did not jeopardize macroeconomic stability. The promotion of solarization and net metering enabled households to contribute to grid stability while lowering their costs.
The government’s regional trade diplomacy, especially under the rebooted CPEC framework, unlocked potential in logistics, mining, and industrial cooperation. The operationalization of Gwadar port and new trade corridors with Central Asia and Iran placed Pakistan at the heart of regional connectivity. The strategic shift toward export-led growth, as emphasized by the finance minister in various forums, aimed at reducing dependency on import substitution and widening the productive base of the economy.
The improved institutional coordination among fiscal, monetary, and trade authorities reflected a new governance ethos, one focused on coherence, predictability, and long-term planning. The government’s clear communication, demonstrated by regular briefings and global roadshows, helped anchor expectations and rebuild public trust in economic institutions. The use of technology in public finance management and real-time data monitoring ensured better policy responsiveness and resource allocation.
The international financial community acknowledged the credibility of Pakistan’s economic turnaround, citing the rare combination of falling inflation, improving current account, stable currency, and growing investor interest. The Finance Minister’s proactive outreach and transparent articulation of reform steps positioned Pakistan as a promising frontier market, regaining access to sovereign credit and attracting developmental financing on favorable terms.
The government’s emphasis on fiscal discipline, technological modernization, and global integration offered a clear break from the ad-hoc and politically driven policies of the past. The resilience of the banking sector, sustained remittance flows, and greater private sector participation contributed to the depth and sustainability of the ongoing recovery. The acknowledgment of structural weaknesses, coupled with concrete steps to address them, provided a roadmap for inclusive and sustainable growth.
The outlook for FY25 remained cautiously optimistic, with inflation projected to average between 5.5 and 7.5 percent and the current account balance likely to remain close to zero. The risks, including global geopolitical volatility, climate shocks, and domestic policy slippages, were clearly identified and integrated into forward-looking policy frameworks. The institutional maturity demonstrated by the State Bank and the Ministry of Finance in navigating uncertainty laid the foundation for enduring economic resilience.
The current administration, despite inherited challenges, succeeded in stabilizing the economy through a coherent and sequenced reform strategy that balanced short-term stabilization with medium-term structural transformation. The successful negotiation and adherence to the IMF’s EFF programme, the taming of inflation, the reduction in interest rates, and the improvement in Pakistan’s global economic standing constituted a remarkable reversal of fortunes. The economic leadership’s ability to maintain reform momentum amidst political transitions and external headwinds testified to a new era of professionalism and resolve in Pakistan’s economic management.
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Dr. Ikramul Haq, an advocate of the Supreme Court and writer is an adjunct faculty at Lahore University of Management Sciences (LUMS). Abdul Rauf Shakoori is a corporate lawyer based in the USA.