FY24 Economic Report Card

Macroeconomic stabilization efforts

Government Policy and Fiscal Discipline: The Government of Pakistan has initiated a series of robust policy measures to stabilize the economy in the face of persistent challenges such as inflation, fiscal mismanagement and external weakness. A renewed focus on fiscal discipline coupled with comprehensive Federal Board of Revenue (FBR) reforms was crucial. A promotion agreement was successfully concluded with the International Monetary Fund (IMF), which led to the adoption of an expanded economic stabilization and growth program.

In FY2024, Pakistan’s real GDP recorded a growth of 2.38%, a significant improvement compared to the contraction of 0.21% in the previous year. The agricultural sector contributed to this change, recording a remarkable growth of 6.25 percent – the highest in 19 years. The industrial and services sectors also showed resilience, with growth of 1.21% each.

Sector performance and economic recovery

Agriculture: A beacon of growth: The agricultural sector has emerged as a key driver of economic growth, contributing significantly to food security and price stability. Key crops such as wheat, rice and cotton recorded double-digit growth rates. For example, cotton production increased by 108.2 percent to 10.22 million bales. Success in agriculture was enhanced by favorable weather conditions, timely political support and increased access to credit and agricultural inputs.

Industrial and Services Sector: Despite global supply disruptions and challenges in the domestic market, Pakistan’s industrial sector recorded a modest growth of 1.21%. It is worth noting that large-scale manufacturing saw a slight decline, but sectors such as pharmaceuticals and machinery and equipment recorded impressive growth. The services sector, which contributes 57.7% of GDP, also recorded moderate growth of 1.21%, reflecting improved economic conditions and consumer confidence.

Inflation and the development of the external sector

Fighting Inflation: Inflation remained a pressing challenge throughout fiscal 2024. However, a combination of monetary tightening, fiscal consolidation and favorable global commodity prices contributed to the declining inflation trend in the third quarter. Headline CPI inflation averaged 24.5% in the July-May period of FY2024, marking a significant improvement over the previous year.

External Account and Foreign Exchange Reserves: Pakistan’s external account has shown marked improvement with the current account deficit significantly reduced by 94.8% to $0.2 billion. This was achieved through strict import controls and concerted efforts to increase exports and remittances. By the end of May 2024, foreign exchange reserves had increased to $14.6 billion, providing protection against external shocks and increasing investor confidence.

Fiscal development and public debt management

Fiscal Deficit and Revenue Mobilization: Fiscal consolidation efforts yielded positive results, with the fiscal deficit remaining manageable at 3.7% of GDP. Revenue mobilization improved significantly due to enhanced tax collection measures under the Finance Bill 2023. Total revenues increased by 41.0% during July to March FY 2024, reflecting the government’s commitment to strengthen public finances.

Public Debt and Financing: Total public debt was 67,525 billion rupees at the end of March 2024 and domestic debt was 43,432 billion rupees. To effectively manage the fiscal deficit by reducing reliance on short-term borrowing, the government has prioritized long-term domestic debt securities. Efforts to diversify the investor base through innovative instruments such as Sukuk have further stabilized debt management.

Sector initiatives and future prospects

Education and health: The government has committed significant resources to education and health, recognizing their key role in sustainable development. An amount of Rs 69.7 billion has been allocated for higher education and Rs 25.3 billion has been allocated for health sector projects under the Public Sector Development Program (PSDP). These investments aim to improve literacy rates, improve healthcare delivery and support social protection initiatives.

Information Technology and Telecommunications: The IT and telecommunications sector continued to thrive, with IT export earnings increasing by 17.4 percent to $2,283 million. Initiatives to support freelancers and start-ups have contributed to the sector’s strong performance, positioning Pakistan as a competitive player in the global digital economy.

Pakistan’s pursuit of economic stability and growth in FY2024 highlights the importance of sound policy management and sectoral reforms. While challenges remain, positive trends in key economic indicators signal a path towards sustainable and inclusive economic growth. Continued focus on fiscal discipline, external account stabilization and strategic investments in high-potential sectors will be critical to realizing Pakistan’s economic aspirations in the coming years.

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The author is a researcher at the Sustainable Development Policy Institute (SDPI).