State of Pakistan’s economy 2024–2026

The PDM-2 government, led by Mr Shehbaz Sharif, came to power on March 4, 2024, and Mr Muhammad Aurangzeb assumed office as Federal Minister for Finance and Revenue on March 11, 2024. The economic situation of Pakistan in March 2024 was as follows:

The nominal size of Pakistan’s economy was US$371.7 billion. Pakistan’s GDP growth rate was 2.4%, with the agriculture sector growing by 6.25%, large-scale manufacturing industries (LSMI) by 2.0%, and the services sector by 4.0%. The investment-to-GDP ratio had recorded a decline to 13.14%. The policy interest rate was 13.0%. Pakistan’s Consumer Price Index (CPI) registered a month-on-month increase of 1.7%, while year-on-year inflation increased to 20.7%. Urban CPI stood at 21.9%, while rural CPI was 19.0%. Pakistan’s overall unemployment rate had reached 7.1%, and absolute poverty in the country stood at 29.0%. In the same year, Pakistan recorded a current account surplus of US$619 million.

Pakistan’s exports of goods and services stood at US$3.23 billion, while imports amounted to US$5.25 billion, resulting in a trade deficit of US$2.02 billion. Pakistan’s public debt stood at Rs71.25 trillion. Domestic debt amounted to Rs47.2 trillion (44.9% of GDP), while external debt stood at Rs24.0 trillion (or US$131.0 billion, equivalent to 23.0% of GDP).

In November 2026, after almost two years and eight months, the economic situation of the country, according to the State Bank of Pakistan report, is as follows:

The nominal size of the economy has reached approximately US$450.4 billion. Pakistan’s GDP growth rate is 3.7%, with the agriculture sector growing by 3.5%, large-scale manufacturing industries (LSMI) by 5.0%, and the services sector by 4.0%. The investment-to-GDP ratio stands at 14.4%. The policy interest rate is 12.0%. Pakistan’s Consumer Price Index (CPI) registered year-on-year inflation at 10.3%. Urban CPI stood at 10.12%, while rural CPI was 10.5%. Pakistan’s overall unemployment rate has reached 7.1%, and absolute poverty has increased to 48% of the population. In the same year, Pakistan recorded a current account deficit of US$874 million.

Pakistan’s exports of goods and services stood at US$8.4 billion, while imports amounted to US$19.2 billion, resulting in a trade deficit of US$10.8 billion. Pakistan’s remittances stood at US$41.6 billion. The country’s public debt stood at Rs86.7 trillion (US$290 billion), with a debt-to-GDP ratio of 70.2%. Domestic debt amounted to Rs59.5 trillion (68.3% of GDP), while external debt stood at Rs25.7 trillion (or US$138.85 billion, equivalent to 23% of GDP).

From the above data, it can be seen that, from March 2024 to November 2026, Pakistan’s nominal economic output increased by US$78.7 billion. The GDP growth rate increased by 1.3 percentage points. Agriculture sector growth fell by 2.75 percentage points. Large-scale industry growth increased by 3 percentage points, while services sector growth remained stagnant at 4.0%. The investment-to-GDP ratio increased during this period. The policy interest rate decreased by 1.0 percentage point.

CPI inflation, including urban and rural inflation, increased, driven by rising energy prices (oil, gas and electricity) and increasing transportation costs and food inflation. The unemployment rate remained stagnant at 7.1% of the registered labour force in the country. Absolute poverty increased from 29% to 48% during this period. The current account position shifted from a surplus of US$619 million to a deficit of US$874 million. The trade deficit increased from approximately US$2.0 billion to US$10.8 billion.

Public debt increased from Rs71.25 trillion to Rs86.7 trillion, an increase of Rs15.45 trillion. Domestic debt increased by Rs12.3 trillion, while external debt increased by US$7.85 billion.

It can be seen from the above data that, although Pakistan’s economy has grown from March 2024 to the end of 2026, agriculture sector growth has declined, and services sector growth has remained stagnant. Although large-scale manufacturing has shown growth, the investment-to-GDP ratio has also increased, accompanied by a decrease in policy interest rates.

We also see that Pakistan’s exports have increased, but the overall trade deficit has widened. This has been offset by an increase in remittances; nevertheless, the current account has moved into deficit.

It can also be seen that economic gains have not translated into social gains. Although official unemployment rates have remained stagnant and the minimum wage has increased, poverty levels have risen drastically from 29% to 48%. Inflation, particularly food and energy inflation, is diminishing the purchasing power of the general public, driven by high energy prices, as reflected in the increase in CPI during this period.

We can also see that the country’s public debt has increased substantially during this period, with both domestic and external debt rising considerably. This shows that the government’s finances and the overall economy, managed by Finance Minister Mr Aurangzeb, have been seriously mismanaged. The declining state of Pakistan’s social sectors is another major concern. Almost four million children are added to the population every year, and the population has reached 260 million. Around 30% of the population is below 18 years of age, 30% comprises young people below 30 years of age, another 30% consists of adults below 65 years of age, and only 10% belongs to the older generation above 65 years of age.

Monetary inflation, also called demand-pull inflation, can be managed through monetary policy and policy interest rates. However, cost-push inflation, which is the real cause of high prices, is driven by high energy costs and a heavy tax regime that favours the rich and is unfavourable to vulnerable sectors of society. This offsets both the supply side, particularly agriculture, which should contribute to food security, and the demand side, where consumer surpluses have declined drastically.

If remittances had not increased, the financial and current account situation of the country would have been even more precarious.

The question is: why is the country’s debt situation deteriorating?

The answer is that the upper classes of the country rely heavily on imported goods, including energy sources, transport, luxury items, machinery and raw materials, as well as foreign travel by the rich and powerful. There are almost no poverty eradication schemes initiated by the government so far.

The government is relying heavily on debt and is caught in a classical debt trap, in which new loans are taken to repay old loans, or friendly countries and the IMF are asked to reschedule existing debt. Almost 54% of the budget goes towards paying interest on these loans.

Pakistan needs drastic reforms in its education policy to favour the youth of the country, as well as reforms in its energy policy, tax policy, law and order policy, administrative policy, judicial policy, water policy and other areas. In other words, the country needs a complete revamping of its policy structures to favour future generations and the poor rather than maintaining an elite-centric policy approach.

This is essential if Pakistan is to become self-reliant and achieve stable, employment-oriented economic growth and development. Otherwise, the country’s economic, social and debt crises will multiply and become unsustainable for future generations.