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Pakistan's Economic Outlook: Challenges Persist Amid Signs of Stabilization
Amid one of its worst economic crises, Pakistan's central bank highlights key developments: foreign debt remains stable, inflation eases, and remittances are set to surpass $35bn this year. Is recovery on the horizon?
ND
by News Desk
2025-01-09
Pakistan's Economic Outlook: Challenges Persist Amid Signs of Stabilization

In 2023, Pakistan grappled with a severe economic crisis marked by all-time high inflation and a plummeting foreign exchange reserve of $4.6 billion — barely enough to cover three weeks of imports. This dire situation compelled the government to seek a $7 billion bailout from the International Monetary Fund (IMF) to stabilize its balance of payments (BoP) crisis.
The IMF’s projections for Pakistan's economy include a gradual recovery, with the growth rate expected to reach 4.5% by 2029.
During a press briefing today, State Bank of Pakistan (SBP) Governor Jameel Ahmed offered insights into the country’s economic situation. He noted that Pakistan’s external debt remained unchanged from 2022 at $100.08 billion, with an additional $500 million added due to debt revaluation.
Highlighting measures to tackle debt, Ahmed said most borrowing this year was from multilateral institutions, with short-term debt being replaced by long-term debt. He emphasized that this shift would ease debt servicing pressures and improve the BoP situation.
The SBP governor stressed that Pakistan’s biggest economic challenge remains its BoP crisis, exacerbated when growth surpasses 4% without sufficient foreign exchange reserves. To achieve sustainable growth, Ahmed urged a focus on boosting exports.
On business and foreign investments, Ahmed noted that business confidence is expected to rise as the economy stabilizes, leading to increased foreign direct investment (FDI). He reported that $1.1 billion in dividends had already been repatriated this year, demonstrating improved conditions for foreign investors.
Inflation, a key economic indicator, surged above 10% in November 2021 and remained in double digits for 33 months, peaking at 38% in May 2023 due to soaring food and energy prices. However, Ahmed expressed optimism that inflation would stabilize within the central bank’s target range of 5–7%.
The governor also highlighted remittance inflows as a positive development, projecting that they would exceed $35 billion in the current financial year, providing critical support to the economy.
While significant challenges persist, including high debt and external vulnerabilities, these developments suggest that Pakistan may be taking steps toward stabilizing its economy. Sustainable growth, Ahmed noted, will depend on long-term strategies to improve exports and maintain fiscal discipline.
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inflation

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