Economic Overview
Pakistan has achieved steady growth since 2013 in the aftermath of a credit facility agreement with the IMF. However, economic growth slowed in recent years due to measures taken by the authorities to address macroeconomic imbalances and turned negative in the aftermath of the COVID-19 pandemic. Pakistan faced an economic crisis at the start of FY24, with debt default risks, political instability, and inflationary pressures. Import controls and capital outflow measures disrupted supply chains. Since then, the situation has improved. The IMF Stand-By Arrangement in July 2023 restored exchange rate flexibility, relaxed import controls, and introduced fiscal measures. Political uncertainty eased, and strong agricultural growth helped the economy recover. After contracting by 0.2% y-o-y in FY23, real GDP growth at factor cost rose to 2.4% in FY24. The recovery is expected to continue, with growth projected at 2.8% in FY25, supported by imported inputs, easing supply chain disruptions, and lower inflation. However, growth will remain below potential due to tight macroeconomic policy, high inflation, and ongoing policy uncertainty (World Bank data).
Concerning public finances, the fiscal deficit narrowed by 0.9 percentage points to 6.8% of GDP in FY24 due to fiscal tightening. Higher direct taxes and petroleum development levy hikes increased revenues, surpassing non-interest expenditures and resulting in a primary surplus of 0.9% of GDP. However, rising interest spending crowded out public investment. While social protection spending grew, development expenditures declined, weakening social services and delaying progress on reducing high stunting and learning poverty rates. As per the World Bank forecast, the fiscal deficit is projected to rise to 7.6% of GDP in FY25 due to higher interest payments, but it is expected to gradually decrease with fiscal tightening and lower interest payments. Pakistan's debt-to-GDP ratio has dropped to its lowest in over six years, reaching 65.7% as of September 2024. The State Bank of Pakistan (SBP) reported that the total public debt of the federal government stood at Rs. 69.570 trillion in September 2024. This decrease signals a positive shift in Pakistan’s fiscal health as the country works to manage public finances and reduce dependence on external borrowing. Headline inflation slowed to an average of 23.4% in FY24, down from 29.2% in FY23, driven by high base effects, currency appreciation, and slower food inflation. With continued high base effects and lower commodity prices, inflation is expected to ease to 11.1% in FY25, though it will remain elevated due to higher domestic energy prices, expansionary open market operations, and new taxation measures.
Pakistan's unemployment rate is 6.3%, with 4.51 million unemployed, as per the Economic Survey 2023-24. The labour force totals 71.76 million, with 48.5 million in rural areas and 23.2 million in urban areas. Of the 67.25 million employed, 45.7 million are rural and 21.5 million are urban workers. Youth unemployment is highest at 11.1%, with 10.0% for males and 14.4% for females. The 25-34 age group has a 7.3% unemployment rate, with 5.4% for males and 13.3% for females. Female unemployment is notably higher, especially among youth. The level of underemployment remains very high, and much of the economy is informal. While the poverty rate has fallen by 40% over the last two decades, it is still high: using the lower-middle-income poverty rate of USD 3.65 per day, in fact, the World Bank calculated that Pakistan's poverty ratio stood at around 40.5% at the end of FY24. The country has a low GDP per capita (PPP), estimated at USD 6,715 in 2024 by the IMF.
| Main Indicators | 2023 | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) |
| GDP (billions USD) | 337.46 | 374.60 | 0.00 | 0.00 | 0.00 |
| GDP (Constant Prices, Annual % Change) | -0.2 | 2.4 | 3.0 | 4.0 | 4.1 |
| GDP per Capita (USD) | 1,458 | 1,588 | 0 | 0 | 0 |
| General Government Gross Debt (in % of GDP) | 77.3 | 69.2 | 71.4 | 69.8 | 67.4 |
| Inflation Rate (%) | 29.2 | 23.4 | 9.5 | 7.8 | 6.5 |
| Unemployment Rate (% of the Labour Force) | 8.5 | 8.0 | 7.5 | 6.5 | 5.5 |
| Current Account (billions USD) | -3.28 | -0.67 | 0.00 | 0.00 | 0.00 |
| Current Account (in % of GDP) | -1.0 | -0.2 | -0.9 | -0.9 | -0.8 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
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