Pakistan's Economic Survey for FY 2024-25 Showcases Government's Reform Agenda

Strategic Insights -

Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, presented the Economic Survey for FY 2024-25 at a press conference, highlighting the government's assessment of the national economy before the upcoming federal budget. The minister announced a significant drop in the policy rate from 22% to 11%, signaling growing economic stability. The survey showcases the government's reform agenda, emphasizing structural changes aimed at improving governance and fiscal health.

Key Takeaways:

  • Pakistan's GDP grew by 2.7% in the current fiscal year, a strong rebound from negative growth in 2023, and is estimated to grow 2.5% in 2024, while global GDP growth is projected at 2.8% in 2025.
  • Inflation declined sharply from over 29% in 2023 to 4.6%, attributed to effective economic management.
  • Foreign exchange reserves have substantially increased, and the debt-to-GDP ratio declined from 68% to 65% due to effective economic management and the implementation of IMF-supported reforms.
  • The reduction in the policy rate has resulted in lower debt servicing costs, and the IMF programme has supported the implementation of key reforms.
  • The tax-to-GDP ratio has reached a five-year high, driven by the expanded use of technology in tax collection, and the energy sector has seen major gains in reform, with power distribution companies (DISCOs) showing improved performance after the appointment of professional boards.
  • The government is moving towards a defined-contribution pension system and is undertaking a comprehensive review of 43 ministries and over 400 attached departments to reduce inefficiencies.
  • Senator Muhammad Aurangzeb credited Federal Ministers Awais Leghari and Ali Pervaiz Malik for accelerating energy reforms and highlighted the key agreement with banks to tackle the Rs 1.27 trillion circular debt.

Statistics:

  • GDP growth: 2.7% in the current fiscal year, 2.5% in 2024, and 2.8% global GDP growth for 2025.
  • Inflation: dropped from over 29% in 2023 to 4.6%.
  • Foreign exchange reserves: substantially increased.
  • Debt-to-GDP ratio: declined from 68% to 65%.
  • Tax-to-GDP ratio: reached a five-year high driven by technology in tax collection.
  • Debt: reduction in debt servicing costs due to reduced policy rate.
  • Pension reform: moving towards a defined-contribution pension system.

Sources:

  • "Economic Survey 2024-25" presented by Senator Muhammad Aurangzeb
  • Various government sources and announcements