ISLAMABAD: Finance Minister Muhammad Aurangzeb on Monday said inflation has significantly declined from 29 percent in fiscal year 2024 to 4.5 percent in fiscal year 2025, as the country is moving in the right direction on the back of improvements in fiscal, monetary, and governance sectors.
The minister stated this while unveiling the Economic Survey 2024-25, which also noted that country missed the GDP growth target of 3.5 percent set for the fiscal year 2025, as it grew by 2.68 percent.
The minister flanked by Finance Secretary Imdadullah Bosal and Chief Economist and Economic Advisor DrImtiaz Ahmed, claimed that economic indicators have improved under the leadership of Prime Minister Shehbaz Sharif and the increase in GDP reflects signs of economic progress.
The minister said that the global GDP growth in 2023 stood at 3.5 percent, which was reduced to 3.3 percent in 2024 and is now projected to be 2.8 percent according to the latest estimates. Pakistan’ growth rate in 2023 was -0.2 and in 2024 it was 2.5 percent. At the global level, there has been a slowdown in overall GDP growth, but Pakistan’s performance must be viewed within this broader context,” he said.
GDP grew by 2.68 percent, driven by a robust 4.8 percent rebound in industrial activity, while the size of the economy reached the $411 billion mark for the first time, besides per capita income increased to $1,824, he added.
Giving a breakdown of the performance of different sectors, he pointed out that industry grew by 4.8 percent. Small manufacturing grew by 1.3 percent, while large-scale manufacturing contracted, but the contraction was less than last year. He, however, said that the auto sector went up by 40 percent, wearing apparel 8 percent, textiles 2 percent, and petroleum products 4.5 percent.
He said services registered growth of 2.9 percent, Information and Communication 6.5 percent, Construction & Real Estate 3.8 percent, and Food Services 4.1 percent. Agriculture sector grew by 0.6 percent, said the minister, adding that livestock went up by 4.7 percent, while poultry performed extremely well, growing at 8 percent. Fisheries and forestry also registered growth. He said fruits and vegetables collectively grew by 4.8 percent.
He said that agriculture credit increased by 16 percent, crossing over two trillion rupees.
Finance minister said current account had a surplus of 1.9 billion dollars in the first ten months of the current fiscal year, expressing confidence that the year will end in surplus.
He further said that policy rate has reduced from 22 percent to 11 percent, while the debt-to-GDP ratio has improved, falling from 68 percent to 65 percent. The economic recovery, which began in 2024, has continued into 2025.
Replying to a question regarding the data, Aurangzeb said that these are official estimates. “The data provided is by the government. Therefore, we will stick to what the government has said and provided. I am going to stay with this,” Finance minister added.
Talking about the International Monetary Fund (IMF) loan, Aurangzeb asserted, “our credibility and trust was re-established under Prime Minister Shehbaz Sharif’s leadership.”
Noting that the premier had signed the Stand-by Arrangement (SBA) before the caretaker administration took over, the minister also praised the efforts of caretaker finance minister DrShamshad Akhtar as her “discipline allowed us to continue”.
Regarding the Extended Fund Facility program, the minister said that there were two reasons for Pakistan desiring this new arraignment including aiming to bring permanence to macroeconomic stability and remove fragility.
The second reason, he added, was to continue with structural reforms. “We needed to fundamentally change the economy’s DNA, and for that, we needed structural reforms which are elusive in this country. We needed to proceed with a structured programme,” he said.
Aurangzeb said tax-to-GDP has hit a five-year high and the prime minister is leading this personally. This whole transformation is around people, processes, and technology.
“Tech played a big role — digital invoicing, production tracking, AI audits, faceless customs regime,” he added, terming the progress in fiscal year 2024-25 great.
Aurangzeb highlighted that industrial and household energy tariffs had been slashed, while private sector and professional boards were introduced for power distribution companies.
“Distribution losses will be reduced going forward,” he added, noting that the National Transmission and Despatch Company (NTDC) distributing to three companies was an important step toward reducing the bottleneck in transmission.
The finance minister said resolving the Rs1.275 trillion circular debt would play an important role.
“State-Owned Enterprises (SOEs) have been talked about at length, and Rs800 billion has been spent, if you add up equities and guarantees, this goes into the trillions. Those trillions are better spent elsewhere,” he underscored.
Talking about the government’s decision to privatise 24 SOEs, Aurangzeb said that it would be completed with renewed vigour and energy next year under adviser to the PM, Mohammad Ali.
“Debt servicing is the single-largest expense for the federation. In the past year, the policy rate fell and saved us Rs800 billion in debt servicing costs,” the finance minister said, adding that he would address it in detail on Tuesday (today).
On pension reforms, the minister stated that contributions must be defined for new government colleagues joining from July 2024. “Our biggest step is to stop bleeding and then solve legacy issues. But if we do not stop leakages, it will become very difficult for us to start tackling legacy issues,” he emphasised.
Shedding light on the ongoing rightsizing efforts by the government, Aurangzeb said that “forty-three ministries and 400 attached departments” were to face reduction.
“It’s not [about] the what and why the federal government has to be rightsized. The question is how,” he said, adding that they will “continue with five ministries at a time”.
The minister termed the 7 percent increase in exports, especially in the IT sector as a big jump, adding that money earned by freelancers was close to $400 million.
He also noted that imports had increased by 12 percent, with non-oil imports almost at the same level as back in 2022, which he said was the time before the country’s economic crisis.
The minister also stressed the need to “do a deep dive” into the sectors that have declined, which he said included chemicals, iron and steel.
“Fitch upgraded Pakistan’s credit rating; Moody’s outlook also turned positive. Pakistan received the latest IMF tranche despite all challenges. The IMF approved climate financing for Pakistan. Pakistan received the IMF tranche on merit, despite opposition. Economic security is vital for national security, said the finance minister.
He further said that international financial institutions and friendly nations stand with Pakistan. Local investment will attract foreign investment, the minister added. The Special Investment Facilitation Council (SIFC) is focused and will prove to be a game-changer. Rs30billion were raised through Sukuk bonds, he added.
“Remittances, like inflation, have been an outstanding story,” said the minister, adding that it registered 31 percent increase year-on-year from $31 billion and a record $4.1 billion in March. When we close June, we expect our overall remittances to be $37-38 billion,” he added.
“It is very critical that we mention the momentum of the Roshan Digital Account (RDA) because that is investment and lifestyle-led,” said finance minister, adding that RDAs a “different segment of our diaspora”, with inflows from it crossing $10 billion and 814,000 accounts opening.
The minister further said there was a 26 percent increase in terms of revenue collection, “on the back of 30 percent growth in revenue last fiscal year. “There has been a deepening and expanding of the tax base,” Aurangzeb stated.
“Individual filers doubled to 3.7 million filers. High-value filers also increased by 178 percent,” he said, recalling there were 74 percent additional retail registrations in the last fiscal year.
Aurangzeb pointed out that the government had “brought back Rs1 trillion in local debt due to two reasons. “We reduced the prices and money going into markups,” he highlighted, adding that the second reason was to give a signal to the banking system that the government was “not a desperate borrower anymore.”
“We will borrow, but at our terms. It is about time you start lending to the private sector. This was an important message for the banks and they can see the increase,” the minister said.
“The way our military helped our nation get a real, real win against India, so, we too have been fighting a war on the economic front. “The Indian executive director left no room for us. He did not want the IMF meeting to happen. If it did, he did not want certain items on the agenda, such as receiving the second tranche of the EFF,” the minister said, referring to New Delhi approaching the Fund over Pakistan’s loan.
“Financial institutions and our bilateral partners are standing with us on the economic front as well because economic security is absolutely critical as we move forward,” Aurangzeb said. “It is a very critical component of national security,” the minister stressed.
“Macroeconomic stability is not an end in itself, it is a means to an end. If people’s letters of credit are opening, remittances are happening, the policy rate is down, and Kibor rate is at 11-12 percent, these are not rosy but factual”, he added.
On a recent report by the World Bank, which said 44.7 percent of Pakistanis live below the poverty line, the minister talked about a threshold change across the world.
Responding to a question on unemployment, Aurangzeb said that the government’s job is to provide an ecosystem. I am not in favour of announcing that one to three billion jobs are being provided.
Terming freelancers the country’s future, he highlighted a Pakistani diaspora that gave a $15 million grant to the Lahore University of Management Sciences to create blockchain technology.
“Our children who make $8-10 they get into Web 3.0 their income can go to $100 as that is the programming. But if we take them to value add, then the income is beneficial to them and the country.”
The minister affirmed he would speak with “enforcement agencies” about ensuring the Rs37,000 minimum wage. “We have enough laws and legislation,” he said.
Aurangzeb said in coming years, the need for external financing will decrease. Next year, the country is on the right track to achieve a 4.2 percent growth target. The government’s focus is to create an ecosystem that fosters employment opportunities. Economic stability has been restored in the country, he added. In the budget, measures will be announced to support the most vulnerable groups, he said.
Finance Secretary said there had been a significant reduction in the fiscal deficit. “We have reduced expenses a lot; nothing more was possible,” he added.
Reuter adds: Economy likely grew 2.7% in the fiscal year ending June 2025 after expanding 2.5% in the previous year, the government’s annual snapshot of economic performance showed on Monday, a day before the federal budget is unveiled.
The government initially targeted 3.6% growth in gross domestic product for this financial year, but lowered that to 2.7% last month. The International Monetary Fund expects growth of 2.6% this financial year and 3.6% next.
Prime Minister Shehbaz Sharif’s government is aiming for 4.2% growth next fiscal year amid competing priorities, including boosting investment, maintaining a primary surplus, and managing defence spending amid tensions with India.
Finance Minister Muhammad Aurangzeb said he did not want the economy to expand too quickly, which has led in the past to a surge in imports.
“Don’t get into a sugar rush,” Aurangzeb said. “Because the moment we go into a consumption-led growth, and our imports go haywire and our balance of payments problem intensifies, that sort of derails the entire discussion,” he told a press conference.
For fiscal 2025, growth was held back by a reduction in output from large-scale manufacturing and a decline in major crops. Agricultural sector growth of 0.6% was the lowest in nine years, hit by adverse weather.
Topline Securities, a local brokerage, said the 2.7% growth in fiscal 2025 was well below Pakistan’s long-term average of 4.7%, and was likely to be revised down due to optimistic assumptions on industrial output.
The government’s total revenue for the first three quarters of fiscal 2025 was 13.37 trillion rupees, the survey showed, up 36.7% over the previous year.
Pakistan had a current account surplus of $1.9 billion in the nine months compared with a deficit of $200 million in the same period a year earlier, it showed.
The central bank, in a bid to encourage growth, has cut its policy rate by more than 1,000 basis points this fiscal year. Its latest cut last month brought the key rate to 11%, resuming an easing cycle that had brought rates down from 22% after a pause in March.
Aurangzeb said easier credit terms should bolster the economic recovery.
The fiscal deficit was 2.6% of GDP in the first three quarters of the fiscal year. Inflation was seen at 4.6% for the year.
The update comes as Pakistan’s economy is stabilising but remains fragile as the country navigates reforms under a $7 billion IMF programme.
Pakistan’s federal budget for the next fiscal year starting July will be released on Tuesday.
Copyright Business Recorder, 2025
