Pakistan’s economic revival: a path towards sustainable and inclusive growth

In recent years, Pakistan has embarked on a transformative journey towards economic stabilization and growth. Confronted with formidable challenges, we implemented decisive reforms to build a robust foundation for sustainable and inclusive development. Today, the results of these efforts are becoming evident, with the economy demonstrating resilience and renewed potential.

When I assumed office as Finance Minister in 2024, Pakistan faced severe fiscal and monetary pressures. Inflation had surged to 38%, straining households and eroding purchasing power. Foreign exchange reserves had dropped dangerously low, barely covering two weeks of essential imports like food and fuel. Industrial output had contracted by 10.3%, and GDP growth had plummeted to 0.2%. The compounded effects of COVID-19 and devastating floods causing over $30 billion in damages further tested our resilience.

Recognizing the gravity of the situation, we implemented a series of necessary reforms. These included stabilizing the exchange rate, tightening fiscal policies, and curbing inflation through targeted monetary interventions. With support from the IMF’s Extended Fund Facility (EFF) worth $7 billion, we initiated structural improvements in critical sectors such as energy and taxation. Central to this effort was “Uraan Pakistan”, an economic transformation plan launched in 2024. This initiative aims to achieve sustainable, export-led 6% GDP growth by 2028 through public-private partnerships, enhanced export competitiveness and optimized public finances. Priority sectors include agriculture, energy, textiles, pharmaceuticals and IT.

A pivotal component of Uraan Pakistan is our collaboration with the World Bank on a $20 billion initiative targeting health, education, poverty alleviation, investment and climate resilience. This transformative partnership addresses critical challenges such as child malnutrition, educational outcomes and clean energy adoption. By integrating sustainability into our development framework, we are contributing to global efforts to achieve the United Nations Sustainable Development Goals (SDGs).

In July 2024, we introduced a reform-oriented budget with an ambitious goal of raising Rs13 trillion in revenue – a 40% increase from the previous year. These reforms focused on broadening the tax base by targeting under-taxed sectors like agriculture, real estate and trade, while leveraging technology to enhance compliance and transparency. Modernizing the Federal Board of Revenue (FBR) has been instrumental in streamlining tax administration.

Today, Pakistan’s economy is on a path to recovery. Inflation has dropped to 4.1%, and foreign exchange reserves now provide over two months of import coverage. Goods exports have risen by 7.1%, and the IT sector has grown by an impressive 28% year-on-year. Pakistan’s global default risk has dropped by 93%, signaling renewed faith in the country’s fiscal stability. Local and foreign investors, including global giants like Aramco, BYD and Samsung, are contributing to this economic revival, reflecting Pakistan’s potential as a lucrative investment hub.

The current account has been in surplus for three consecutive months, and investor confidence is at a two-year high. Foreign direct investment (FDI) has grown by 20% in the first half of fiscal year 2025, reflecting renewed trust in Pakistan’s economic trajectory. Initiatives like the Roshan Digital Account have attracted over $9 billion in inflows, while remittances have reached a record $35 billion this year. Additionally, Pakistan’s equity market delivered an 87% return in dollar terms, underscoring strong investor sentiment.

Internationally, Pakistan’s progress has been acknowledged, with all three top global rating agencies upgrading the country’s sovereign ratings. Moody’s revised Pakistan’s economic outlook to ‘Positive’ in September 2024, recognizing the impact of our policy measure.

Despite significant achievements, challenges remain. To break free from cycles of external assistance, Pakistan is addressing structural inefficiencies in revenue collection, energy, state-owned enterprises (SOEs) and privatization. Rightsizing the federal government, reforming SOEs, and fostering export-led growth will strengthen internal revenue streams and reduce reliance on international funding programmes.

Global stakeholders are invited to support Pakistan’s journey by investing in priority sectors such as agriculture, IT, renewable energy, mining and minerals, textiles and apparels, pharmaceuticals, while capitalizing on Special Economic Zones (SEZs). Pakistan’s innovative approaches in taxation and economic stabilization offer valuable lessons for other developing economies. Furthermore, partnerships in climate resilience and sustainable development are crucial for advancing shared global goals.

The cornerstone of Pakistan’s economic transformation is political will and visionary leadership. This journey is not just about overcoming challenges but about harnessing resilience, determination and collective effort. With a remarkable workforce, abundant natural resources, and immense production potential, Pakistan is poised to soar to new heights – contributing to regional stability and global economic progress. This is Pakistan, as I see it.