2024 was supposed to be a transformative year for Pakistan’s economy. With the country’s strategic location at the crossroads of Asia, its young and growing population, and its vast natural resources, many analysts had predicted a year of robust growth and development. However, as the year unfolded, it became clear that Pakistan’s economy was teetering on the brink of disaster. A toxic mix of debt, inflation, and currency fluctuations pushed the country to the edge, threatening to undermine the fragile gains of recent years. The consequences of Pakistan’s economic instability were far-reaching and devastating. Businesses went bankrupt, jobs were lost, and families struggled to make ends meet. The country’s infrastructure, already creaking under the strain of years of underinvestment, began to fray at the seams. As the economy stumbled, Pakistan’s leaders were forced to confront the reality of their country’s precarious financial situation.
As the year began, Pakistan’s economy was already showing signs of strain. In January 2024, the country’s central bank, the State Bank of Pakistan, raised interest rates by 100 basis points to 17%, in an effort to curb inflation and stabilize the currency. However, the move had the opposite effect, causing the rupee to plummet to a record low against the dollar. The resulting currency crisis made imports more expensive, exacerbating the country’s trade deficit and further fueling inflation. In March 2024, Pakistan’s government was forced to turn to the International Monetary Fund (IMF) for a bailout package worth $7 billion. The deal was intended to help stabilize the country’s finances and restore investor confidence. However, the IMF’s conditions for the loan, including a commitment to increase taxes and reduce public spending, sparked widespread protests and strikes across the country. The opposition parties accused the government of selling out to the IMF and compromising the country’s sovereignty.
In August 2024, Pakistan’s economy suffered another major blow when the country’s largest airline, Pakistan International Airlines (PIA), was forced to ground its entire fleet due to a severe shortage of fuel. The crisis was triggered by a dispute between the government and the country’s oil refineries, which had refused to supply fuel to the airline unless their outstanding dues were paid. The resulting chaos at the country’s airports sparked widespread outrage and calls for the government to resign. The incident was seen as a symbol of the country’s deeper economic malaise and the government’s inability to manage the crisis. In September 2024, Pakistan’s government announced a major overhaul of the country’s tax system, in an effort to boost revenue and stabilize the economy. The reforms included a new value-added tax (VAT) regime, as well as measures to broaden the tax base and reduce evasion. However, the move was met with fierce resistance from businesses and traders, who complained that the new taxes would increase their costs and reduce their competitiveness.
In October 2024, Pakistan’s central bank announced a surprise cut in interest rates, in an effort to stimulate economic growth and boost confidence. The move was seen as a gamble by many analysts, who warned that it could fuel inflation and undermine the country’s efforts to stabilize its finances. However, the government argued that the cut was necessary to support businesses and households, which were struggling to cope with the economic downturn. As 2024 drew to a close, Pakistan’s economy showed signs of stabilization, with November and December witnessing a flurry of positive developments. In November, the government successfully floated a $1 billion Eurobond, which was oversubscribed by investors, indicating renewed confidence in Pakistan’s economy. Additionally, the State Bank of Pakistan reported a significant increase in foreign exchange reserves, which rose by $1.2 billion to $10.3 billion, providing a much-needed cushion against external shocks. Furthermore, the 12th International Defense Exhibition and Seminar, IDEAS 2024, was held at the Karachi Expo Centre from November 19-22, 2024, showcasing the latest technological innovations in the defense industry and attracting a significant number of international participants. In December, the government announced a series of measures to boost economic growth, including a reduction in interest rates and an increase in funding for infrastructure projects but Pakistan’s economy remained in a precarious state. The country’s foreign exchange reserves were dwindling, its currency was under pressure, and its inflation rate was soaring. Despite the government’s efforts to stabilize the economy, many analysts remained pessimistic about the country’s prospects for 2025. As one economist commented that, Pakistan’s economy is like a patient in intensive care; it’s not clear if it will survive, but it’s definitely not out of the woods yet.
Despite the challenges, Pakistan remains optimistic about its economic prospects. We hope that the expected implementation of economic reforms will drive progress, and that foreign investors will take notice. Furthermore, the country’s agricultural sector is poised for a strong performance in 2025, as an outcome of favorable weather conditions and government actions. Although the recovery is expected to be slow and gradual, there are also high hopes for the IT sector, which is anticipated to experience significant growth in 2025, driven by government support and private sector investment. Nevertheless, there are risks on the horizon, including the potential for further inflation and currency fluctuations. But overall, 2025 is expected to be a challenging year for Pakistan’s economy.
Pakistan’s Economic Resurgence: Key Factors that Will Drive Growth in 2025
= Increased Foreign Investment: With the government’s efforts to improve the business environment and invest in infrastructure, Pakistan is expected to attract more foreign investment in 2025, which can help boost economic growth.
= Growth in IT Sector: Pakistan’s IT sector has been growing rapidly in recent years, and 2025 is expected to be a breakout year for the industry. With government support and private sector investment, the IT sector is expected to create thousands of new jobs and drive economic growth.
= Agricultural Sector Growth: Pakistan’s agricultural sector is expected to perform well in 2025, driven by favorable weather conditions and government support. This can help boost economic growth and reduce poverty.
= Improved Infrastructure: The government’s efforts to invest in infrastructure, including roads, highways, and public transportation, are expected to pay off in 2025. This can help improve the business environment, reduce transportation costs, and boost economic growth.
= Increased Remittances: Pakistan is expected to receive increased remittances from overseas Pakistanis in 2025, which can help boost foreign exchange reserves and support economic growth.
= Tourism Sector Growth: Pakistan’s tourism sector has been growing rapidly in recent years, and 2025 is expected to be a breakout year for the industry. With government support and private sector investment, the tourism sector is expected to create thousands of new jobs and drive economic growth.
= Increased Economic Cooperation with Neighboring Countries: Pakistan is expected to increase economic cooperation with neighboring countries, including China, Iran, and Afghanistan, in 2025. This can help boost trade, investment, and economic growth.
= Improved Business Environment: The government’s efforts to improve the business environment, including simplifying regulations and reducing bureaucracy, are expected to pay off in 2025. This can help attract more foreign investment, boost economic growth, and create new jobs.
= Increased Focus on Human Development: The government is expected to increase its focus on human development in 2025, including investing in education, healthcare, and social welfare programs. This can help improve the quality of life for Pakistanis and drive long-term economic growth.
= Reduced Inequality: The government’s efforts to reduce inequality, including investing in social welfare programs and implementing progressive taxation policies, are expected to pay off in 2025. This can help reduce poverty, improve the quality of life for Pakistanis, and drive long-term economic growth.
In the end it is concluded that, Pakistan’s economy experienced a tumultuous year in 2024, marked by a toxic mix of debt, inflation, and currency fluctuations that pushed the country to the brink of disaster. Despite efforts to stabilize the economy, including a $7 billion IMF bailout package and a series of economic reforms, the country’s foreign exchange reserves dwindled, its currency remained under pressure, and inflation soared. However, as 2024 drew to a close, there were signs of hope, including a successful $1 billion Eurobond issuance, a significant increase in foreign exchange reserves, and a series of measures to boost economic growth. Looking ahead to 2025, many analysts expect Pakistan’s economy to experience a slow and gradual recovery, driven by increased foreign investment, growth in the IT sector, and improved infrastructure.
