Economic Survey 2024-25 Economy on a right path

The Economic Survey 2024-25, released one day before federal budget announcement, offers a detailed snapshot of the country’s macroeconomic stability, ongoing sectoral reforms, and fiscal challenges. The document defines a critical stage of economic transition, with the government securing significant achievements despite persistent structural and global challenges.

The Economic Survey sets the tone for budget expectations by revealing successes in reducing inflation, improving the external account, increasing investor confidence, and raising fiscal revenues. However, the Survey also flags formidable challenges ahead, especially concerning debt servicing, export competitiveness, and public sector spending that must be addressed through the 2025-26 budget to be announced on June 10, 2025 (today).

The economic situation in fiscal year (FY) 2025 has been described by macroeconomic stability, supported by a disciplined fiscal framework and monetary tightening. The real GDP grew by 2.68 percent (yet to be authenticated), a modest yet meaningful recovery considering the 0.17 percent contraction in FY2023. The GDP at current market prices increased to Rs. 114.7 trillion from Rs. 105.1 trillion in the previous year, reflecting a 9.1 percent nominal growth. The per capita income rose to US$ 1824 from US$ 1662, a 9.7 percent increase, supported by improved exchange rate stability and remittances.

The Economic Survey highlights that the government achieved a historic primary surplus of 3.0 percent of GDP during July–March FY2025, compared to 1.5 percent in the same period last year. It was due to enormous income of central bank posted in the first quarter. This fiscal improvement came alongside a 2.6 percent fiscal deficit lower than the 3.7 percent recorded last year.

The government posted a fiscal surplus in Q1FY2025 for the first time in 24 years, totaling Rs. 1.896 trillion, or 1.7 percent of GDP. Total revenue reached Rs. 13.4 trillion during the first nine months, rising 36.7 percent from the previous year. Tax revenue climbed to Rs. 9.14 trillion (up 25.8%), while non-tax revenue surged 68 percent to Rs 4.2 trillion. The tax collection by Federal Board of Revenue (FBR) for the first time in Pakistan’s history reached Rs. 10.2 trillion for July–May FY2025.

The situation of inflation marked a dramatic turnaround. Headline CPI inflation fell to 0.3 percent in April 2025, its lowest in six decades compared to 17.3 percent a year earlier. Average inflation for July to April stood at 4.7 percent, down from 26 percent in FY2024. Urban food inflation dropped to 1.1 percent and rural food inflation to 1.5 percent, aided by improved agricultural output and stable commodity prices. These developments allowed the State Bank of Pakistan (SBP) to reduce the policy rate to 11 percent, down from 22 percent last year, easing borrowing costs for the private sector.

The external account showed strong recovery. A current account surplus of US$ 1.9 billion was recorded during July–April FY2025, reversing a US$ 1.3 billion deficit last year. Remittances surged 31 percent to US$ 31.2 billion, hitting a record monthly high of US$ 4.1 billion in March 2025. Foreign exchange reserves rose to US$ 16.6 billion by May 27, 2025 (SBP: US$ 11.5 billion; commercial banks: US$ 5.1 billion). Although the trade deficit in goods expanded to US$ 21.3 billion due to a higher import bill, the remittance inflow and stable exchange rate offset the external pressures.

The industrial sector recorded 4.77 percent growth, led by small-scale manufacturing and slaughtering, though large-scale manufacturing (LSM) contracted by 1.5 percent. Resilient segments included automobiles (40% growth), wearing apparel (7.6%), and petroleum products (4.5%). Meanwhile, the mining sector shrank by 3.4 percent, with crude oil (-14.8%), natural gas (-6.8%), and coal (-5.7%) production falling.

The services sector, contributing 58.4 percent of GDP, grew 2.91 percent, making it the largest and most consistent contributor to the economy. Whereas, agriculture posted a tepid 0.56 percent growth, down from 2.3 percent in FY2024, driven by a 13.5 percent decline in major crops. Cotton production fell 30.7 percent, wheat by 8.9 percent, and maize by 15.4 percent, highlighting the impact of adverse weather and poor planning. Livestock grew by 4.72 percent, providing some balance in an otherwise sluggish agricultural sector.

The investment-to-GDP ratio improved to 13.8 percent from 13.1 percent, while the saving-to-GDP ratio increased to 14.1 percent. Gross Fixed Capital Formation rose 15 percent to Rs. 13.8 trillion, signaling a revival in private and public investment activity. Particularly, the stock market surged 50 percent during July–March, reflecting healthy investor confidence. The market capitalization rose from Rs. 10.4 trillion to Rs. 14.4 trillion, driven by improved earnings and macroeconomic stability.

Public debt remained a concern, reaching Rs. 76 trillion by end-March 2025 (domestic: Rs. 51.5 trillion; external: Rs. 24.5 trillion or US$ 87 billion). The interest payments totaled Rs. 6.4 trillion, and debt sustainability remains a significant challenge. However, the government improved the maturity profile of domestic debt from 2.9 to 3.5 years, reducing rollover risks.

 The energy sector generated 90,145 GWh of electricity during July–March FY2025. Thermal contributed 46.3 percent, hydel 30.4 percent, nuclear 19.1 percent, and renewables 4.2 percent. Total installed capacity reached 46,605 MW. Petroleum consumption rose 7 percent, while gas and coal usage declined. The sector remains heavily import-dependent and requires reforms to reduce circular debt and improve efficiency.

The IT and telecom sectors showed impressive growth. ICT exports jumped 23.7 percent to US$ 2.8 billion, and freelancers contributed US$ 400 million. Over 1,900 startups were incubated, creating 185,000 jobs and attracting Rs 30.8 billion in investment. Telecom revenues hit Rs. 803 billion, and broadband subscriptions reached 147.2 million. These statistics underline the transformative potential of the digital economy, though infrastructural and regulatory gaps persist.

The education sector showed mixed results. Literacy stood at 60.65 percent (male: 68%, female: 52.8%). Provincial disparities remained stark showing that Punjab (66.3%), Sindh (57.5%), Khyber Pakhtunkhwa (51.1%), Balochistan (42%). The out-of-school children remain alarmingly high at 38 percent. Higher education received Rs 61.1 billion, and IT-based university programs were launched under World Bank support.  Similarly, health spending reached Rs. 925 billion, or 0.9 percent of GDP. The key initiatives included the National Action Plan for Health Security and nutrition outreach via SUN-Pakistan.

The government allocated Rs. 598.7 billion to the Benazir Income Support Programme (BISP), disbursing Rs. 385.6 billion to 9.87 million beneficiaries by March 2025. The Employees’ Old-age Benefit Institution (EOBI) collections rose to Rs. 56.8 billion, and microfinance loans increased to Rs. 592 billion, reflecting improved financial inclusion. The PRSP recorded Rs. 4.26 trillion in anti-poverty spending, showing alignment with social protection goals.

The climate change portfolio gained traction with the launch of Pakistan’s first Carbon Market Policy and issuance of a Rs. 30 billion Green Sukuk. The government received US$ 1.4 billion under the IMF’s Resilience & Stability Fund (RSF) to enhance resilience against environmental shocks. The Recharge Pakistan Project, backed by US$ 77 million, was also launched for ecosystem-based flood management.

Despite these achievements, the Economic Survey 2024-25 identifies multiple challenges for the upcoming budget. The government must address declining exports, rising debt service obligations, weak agricultural output. Therefore, budget ahead must build on these foundations through structural reforms, inclusive growth policies, and fiscal prudence to ensure long-term stability. The moment demands bold, forward-looking decisions to convert recovery into sustained prosperity for all Pakistanis.

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Dr. Ikramul Haq, Advocate Supreme Court, specializes in constitutional, corporate, media, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws. He holds LLD in tax laws with specialization in transfer pricing.

He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law. He is Chief Editor of Taxation.  He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).

He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition,  Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).

He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).

He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.

X (formerly Twitter): DrIkramulHaq

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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).

Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.

His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.

His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .

 X (formerly Twitter): Adbul Rauf Shakoori

The recent publication, coauthored by these writes is

Pakistan Tackling FATF: Challenges & Solutions, available at:

https://aacp.com.pk/book-detail/pakistan-tackling-fatf-challenges-and-solutions-35

https://www.amazon.com/dp/B08RXH8W46