Economy Shows Signs of Robust Recovery – Pakistan’s economy is showing promising signs of recovery, underpinned by easing inflation, soaring remittances, and strengthening exports, as detailed in the Ministry of Finance’s Monthly Economic Update and Outlook for November. The government’s multifaceted approach to fostering stability and growth is yielding positive results, signaling a turnaround in key economic sectors.

Inflation Declines Significantly

During the first four months of FY2025, inflation dropped sharply to 8.7%, a marked improvement compared to the alarming 28.5% recorded during the same period last year. October’s year-on-year (YoY) inflation was further subdued at 7.2%, indicating sustained price stability. Economists credit this trend to a combination of easing global commodity prices, stable energy tariffs, and proactive monetary measures, including the State Bank of Pakistan’s recent 250 basis points cut in the policy rate, bringing it down to 15%.

Surge in Remittances and Exports

Remittances surged by an impressive 34.7%, reaching $11.9 billion, with Saudi Arabia emerging as the primary contributor. Meanwhile, information technology (IT) exports demonstrated robust growth, climbing 34.9% to $1.2 billion. These inflows have significantly contributed to an improved external account position. The current account posted a $218 million surplus during July-October FY2025, a stark contrast to the $1.5 billion deficit recorded in the same period last year, marking three consecutive months of surpluses.

Industrial Sector Resilience

Despite headwinds, the industrial sector showed signs of resilience. Large Scale Manufacturing (LSM) contracted by 0.8% during July-September FY2025, a slight improvement from the 1.0% decline observed last year. Certain subsectors performed exceptionally well; the automotive sector experienced a significant rebound, with car production rising by 51% and truck and bus production surging by 80%. However, challenges remain in the construction sector, as reflected in a 7.9% decline in cement dispatches.

Agricultural Reforms and Growth

Agriculture is a critical focus area for the government. Efforts to achieve wheat self-sufficiency are underway, with the wheat sowing campaign progressing well. Fertilizer off-take for DAP (Diammonium Phosphate) soared by 92.2% in October, bolstered by Punjab’s interest-free loans distributed through the Kissan Card initiative. These measures aim to ensure sustainable growth in the agriculture sector, which is vital for food security and rural livelihoods.

Fiscal Performance Exceeds Expectations

On the fiscal front, federal revenues witnessed a staggering 186% increase, reaching Rs 4,019 billion. A significant contributor was the Rs 2,500 billion surplus profit from the State Bank of Pakistan, which helped transform the fiscal deficit into a surplus of Rs 1,896 billion, equivalent to 1.5% of GDP. This is a dramatic reversal compared to last year’s deficit and underscores the government’s efforts to enhance fiscal discipline.

Optimistic Outlook

The government remains optimistic about sustaining the recovery momentum. Inflation is projected to stabilize within a range of 5.8% to 6.8% by December, supported by stable energy prices and fiscal consolidation. Exports, imports, and remittances are expected to maintain their upward trajectory, reinforcing the overall economic recovery.

The improving macroeconomic indicators suggest that Pakistan is gradually overcoming its challenges and positioning itself on a sustainable growth path. However, continued vigilance and timely policy interventions will be crucial to navigating external and domestic risks