Heightened concerns grip Pakistan as the IMF pares back its GDP growth projection to 3% from the earlier 3.2%, especially troubling against the backdrop of swift population growth. This update, drawn from Pakistani media, exposes the economy’s precarious balancing act.
The fiscal year’s opening act was lackluster: a 1.25% contraction in large-scale manufacturing over five months, coupled with sluggish exports. Remittances soared to $8.8 billion in early FY2025—the highest ever—propping up an economy otherwise anchored by foreign debt and intermittent assistance.
Sustainability eludes a model so beholden to overseas remittances and creditor leniency, analysts note. IMF stipulations compel tough choices—hiking taxes, trimming subsidies, enforcing fiscal discipline—that stifle investment inflows and burden with underperforming state firms.
Encouraging mid-fiscal trends—a surplus in the current account, rupee stability, easing inflation, and rate cuts—fail to mask the growth shortfall. Much of this hinges on external lifelines, like the UAE’s one-year extension of $2 billion in deposits, rather than indigenous policy triumphs.
For lasting stability, Pakistan must prioritize reforms to ignite investment, enhance competitiveness, and lighten public sector drags. Absent these, the current calm is but a fleeting illusion, jeopardizing long-term economic vitality.