Pakistan’s economy has begun progressing with positive momentum. Just two years ago, it was at risk of surrender, with frequent talks of Pakistan nearing bankruptcy. Some political leaders and economists had declared Pakistan a “technical knockout.” However, the situation has now changed and appears quite positive.
Yesterday, Federal Finance Minister Muhammad Aurangzeb spoke at a literature festival in Islamabad, discussing the country’s economic and financial conditions.
He shared that macroeconomic stability has been achieved, and significant improvements have been made over the past year and a half. He clarified that no elements of the IMF loan agreement were kept confidential, the country’s currency is stable, and foreign exchange reserves have increased. He expressed optimism that in the next three to four months, foreign reserves will cover three months of imports. Inflation has decreased, and the benefits of this should reach the common citizen.
Pakistan has indeed overcome a challenging time. Two years ago, the country was plagued by political instability, with protests and demonstrations impacting the economy directly. But now, Pakistan has emerged from difficult circumstances.
During his speech, the finance minister also mentioned that the government has repaid $1 billion in loans, and reserves remain stable. However, he emphasized the need for tax and structural reforms, restoring the credibility of the Federal Board of Revenue (FBR), closing leaks in the system, and eliminating corruption in refunds. He urged the business community to avoid “speed money” practices.
He also stated that a country cannot run on donations; the private sector needs to step forward to sustain the economy. He emphasized that no country is willing to provide deposits or rollovers anymore, urging Pakistan to learn to stand on its own feet.
The finance minister also mentioned efforts to encourage investment from friendly countries like China, Saudi Arabia, and the UAE. He noted that CPEC’s first phase focused on infrastructure, while the second phase is business-to-business. Reiterating his economic philosophy, he said that the government’s role is not to engage in business, and alternatives are available.
The finance minister’s remarks on the economy are encouraging. Meanwhile, State Bank Governor Jameel Ahmed spoke at a conference on increasing credit, green financing, and green bonds. He projected a 2.5% to 3% GDP growth rate this year and forecasted that remittances from overseas Pakistanis would reach $34 billion. He said that by November’s end, foreign reserves could increase to $12 billion. Inflation has eased, the economic outlook has improved, but private sector borrowing has grown. Remittances in October exceeded $200 million in the Roshan Digital Account. He emphasized the need to address climate change’s impact on the economy and agriculture, as Pakistan is among the top 10 countries most affected by climate risks.
Pakistan’s agricultural sector needs further development, and policymakers are aware of its challenges. The State Bank, in partnership with the World Bank, is working on green taxonomy, and a refinancing scheme for renewable energy projects has been introduced, with Rs 94.7 billion allocated to domestic and industrial initiatives.
The governor highlighted that global economies are shifting toward sustainable economic models, with countries seeking policies to reduce carbon footprints.
According to the State Bank’s data, remittances in October reached $3.05 billion, a 24% increase from last year, while they rose by 7% from September. In the fiscal year’s first four months, remittances increased by 35%, reaching $11.85 billion, compared to $8.79 billion last year. Both the finance minister and the State Bank governor projected remittances to reach $34 billion, a 12% increase from last year’s $30.25 billion.
Remittances from the UAE saw a notable 31% increase, driven by a crackdown on illegal Hawala networks. Remittances from the UK rose by 30%, attributed to the rising number of Pakistanis going abroad. This remittance growth has positively impacted the rupee’s value.
Meanwhile, the IMF emphasized that development targets are challenging without raising the tax-to-GDP ratio. Tax reforms are essential for funding projects in education, health, roads, electricity, and water. Developing countries need to spend 16.1% of GDP on such projects, while emerging economies and developed nations require 4.8% and less than 0.2%, respectively.
It was reported that Pakistan has requested China to reschedule its debt for two years, though no official confirmation has been issued. However, Pakistan’s economy has stabilized, and friendly countries and global financial institutions align with Pakistan’s economic and tax reforms, signaling further improvements in the coming months.