Pakistan’s Economic Journey – OpEd
The economy of Pakistan has been quite resilient and has evolved from a state of crisis to a state of constant stability and growth. The early years of this period, that is FY21 and FY22 marked the country’s toughest economic times characterized by high inflation, rising fiscal and current account deficits and declining investor confidence.
With the effects of these factors combined, they tended to sew the image of the economic distress. By FY23 the economic situation seemed to be tipping, inflation rising to 29.2%, and the current account deficit a stiller concern. Investor sentiment, still further weakened by the uncertainty over the economy, left the government unable to entice the inflow of foreign capital and to maintain growth.
Nevertheless, Pakistan’s economy still started recovering in FY24. Exports, remittances and tax collection have several key indicators and they showed great improvement and a move to the horizon of economic stabilization. The positive momentum by FY25 was strong and achieved a remarkable transformation. Inflation that peaked at FY23 was successfully lowered to just 1.5% by February 2025. The current account, previously in a chronic deficit, started to be in surplus again which restored investor confidence even more and makes Pakistan an upcoming economic power in the region.
The resurgence of Pakistan’s export sector is seen as one of strongest indicators of economic recovery. Exports had declined to $21 billion by 2023 but rebounded in $30.35 billion in 2024 and projected to be in $32.34 billion in 2025. The increase in exports has contributed substantially in cutting down the trade deficit and helping the overall economic outlook. Moreover, Pakistan’s Federal Board of Revenue (FBR) tax collection has witnessed higher rates of growth with the collection for 2021 standing at Rs. 4.745 trillion, 2024 having been planned at Rs. 9.252 trillion while Rs. 12.97 trillion has been targeted for 2025. The improved revenue mobilization has gone a long way in strengthening the fiscal framework and to better allocation on public resource and developmental of infrastructure.
They have also contributed considerably in the economic revival. Remittances slumped from $26.1 billion in 2022 to $20.5 billion in 2023 before picking as much as far $28.78 billion last years and are expected to hit a record $35 billion this year. Foreign exchange reserves as well as much needed liquidity to the economy have been much contributed by these inflows. Further, the stock market performance has also been extraordinary. In 2023, KSE-100 Index that was down to 40,000 jumped to 113,000 in 2025 meaning that investors were all optimistic and finance was stable.
At the same time, Foreign Direct Investment (FDI) has tended to have a positive trend over the years. FDI declined to $1.62 billion in 2023, however FDI bounced back in 2024 to $2.34 billion and is estimated to climb up to $2.8 in 2025. This rise depicts the rising investor confidence, as well as a more suitable environment for investment. The Roshan Digital Account (RDA), that was introduced to allow overseas Pakistanis to remit funds and to invest has not lost its appeal. Expatriates in Pakistan’s financial system have become more trustful as deposits in RDA have grown from $4.6 billion in 2022 to $9.56 billion in 2025.
Chief, however, has been in inflation control which has been the outcome of the most remarkable economic turnaround. While inflation reached a historic high of 29.2% in 2023, no doubt causing pain at the businesses and consumers end, the minister is concerned that the situation is not as grim as some people might think. Yet, with coins and its countermeasures, partner price stabilization measures and fiscal discipline, the inflation rate fell to 1.5% in February 2025. This has alleviated the cost of living crisis, lowered the burden on households and made the country a better place for business to grow and for consumers to spend.
Pakistan also saw a notable recovery on the current account, which had been in deep deficit for years. From the deficit of $17.5 billion in 2022 to the surplus of $0.7 billion in 2025, the country has managed to reach success. This shift has cut down Pakistan’s external vulnerabilities, reduced the dependence on external borrowing and enhanced the macroeconomic stability. Also, the availability of foreign exchange reserves which declined to 9.16 billion dollars in 2023 was significantly improved to 16.05 billion dollars in 2025, strengthening economy and enhancing its resilience towards external shocks.
Pakistan, despite an unfavorable economic landscape, moving towards sustainable economic growth as a steady rise of exports, remittances, tax collection, foreign exchange reserves witnessed in 2023. Increasingly, investors are now confident and the financial markets are performing better as is indicated by the sharp rise in KSE 100 Index from 40,000 in 2023 to a projected 127,000 in 2025. Also, the government has a tighter fiscal discipline with the enormous increase in tax revenues from more than doubled since 2021, which they can use to finance development and public welfare projects.
Pakistan’s capability of withstanding crises and attaining economic correction from 2021 to 2025 shows some firsts. It was prudent economic policies, strategic reforms and other measures which have been investor friendly that has made stability and growth possible. This signifies that Pakistan is heading towards the long term economic sustainability by a substantial improvement in inflation control, trade performance and foreign direct investment. If the policies and structural reforms are continued, Pakistan can reinforce its role as a key economic player in the region.
To sustain this economic momentum, Pakistan will have to go onward beyond 2025. Policymakers have to focus on maintaining investors’ confidence, helping in further boost of exports, keeping fiscal discipline in control and creating a favorable business working environment. However, the country can continue the path of prosperity and development if it remains committed to sound economic management and proactive policy; and realizing its dream of a self-sufficient and resilient economy.
