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#Macroeconomic #stabilisation #Political #Economy
n In recent months, economic headlines about Pakistan have been dominated by vocabulary. The fiscal deficit is shrinking, the current account has turned into a surplus, the inflation is close to the historic lower and the rupee has found the foundation against the dollar. These are not trivial achievements for a country that suffer from the dizzy balance payments, inflation and permanent financial imbalance.
The international community has noted. Credit rating agencies like Fitch have upgraded Pakistan’s perspective, and international financial institutions have praised the government’s “sensible policy position”. Investors, always looking for macro -stable fronts, are starting to take another look at the Pakistani market.
Still, there is a more complex and quiet picture below the surface. The key question facing Pakistan’s policy makers, business leaders and investors is whether this new macro economic stability is a solid foundation for sustainable investment and business expansion, or is merely a mask for structural weaknesses that do not solve a masked solution to a temporary surge.
Promise of stability
Let’s start with positive. With the government’s efforts to reduce the fiscal deficit, it has been reflected from the discipline for public financial affairs by reducing GDP from 3.7 % to 2.6 % at the age of one. This has been obtained through non -tax revenue (eg, the increase in profit from the State Bank and Petroleum Levies) by reducing the current costs and increasing the tax. The Current Account published an additional $ 1.9 billion, changing the loss of years. Foreign exchange reserves have climbed, lending the most important trust to both local and foreign investors.
Inflation, the ban on Pakistani households and businesses has long been dropped, dramatically. In April 2025, consumer prices index increased by only 0.3 % year, less than 17 % a year ago. This allows the central bank to develop a more appropriate financial stand, which reduces policy rates and makes it cheaper for the private sector.
This progress is important. Lower macroeconomic volatility reduces risk premiums, encourages both domestic and foreign investment and provides financial space for targeted development costs. The credit for the private sector has increased significantly, and the Pakistan Stock Exchange, despite the fluctuations, has given a positive response to the stability indicators.
Lack of structural change
However, long -term growth and competitiveness stability is not an essential but appropriate situation. Often, Pakistan’s macro -stabilizing cycle has failed to move forward in widespread, sustainable development. The current wave, the risks of repeating this style, of all its achievements.
Macro economic stability is an important achievement for Pakistan. It offers an opportunity window for improvement. In the absence of a decisive axis towards competition, innovation and institutional power, the promise of stability falls into another.
Looking closely at the investment flow. In the first ten months of the financial year 2025, foreign direct investment has decreased 2.8 % year -on -year, with some focus on some sectors (electricity, financial services oil and gas) and it begins to a great extent from traditional partners such as China, the UK and Hong Kong. Portfolio’s investment has seen a permanent emission, which reflects concerns about the political threat, the regulatory unexpected and delayed barriers to foreign exchange.
Financial hardship, while necessary, did not have strong public development costs or deep structural reforms. Most of the income is obtained from non -tax sources, not by expanding the tax base or improving compliance for sustainable financial health. Import compression, which is an important factor behind the current account surplus, is not a long -term strategy if it restricts access to the necessary capital equipment and disrupts industrial supply chains.
Industrial performance
Massive manufacturing (LSM) contract is underway, which has posted a 1.5 % reduction in the output during the periodic period. Although some export -based sectors and automobiles have shown growth, these benefits are uneven and fragile. Energy barriers, regulatory complexity and weak infrastructure are obstructed in industrial recovery.
In addition, Pakistan’s export cart dominates tight and low -cost textiles and commodities. Despite the increase in IT exports, the wider ecosystem for an extraordinary bright location, innovation, business and technical upgrade is due to the differences found in human capital and digital infrastructure.
Deep fixes
Current stability should be viewed as an opportunity for sophisticated structural improvements and not as an end. The policy stability should be contested by an anticipated tax and regulatory government, strong implementation of the contract and through an integrated industrial strategy that encourages value editions, technology and diversity in exports.
Investing in education, expertise and infrastructure is essential to translate macro stability into a comprehensive and sustainable growth. Deeping the financial sector and reforming the capital market is needed so that private savings can be drawn into the production enterprise, especially SMEs and modern startups.
The government’s recent steps towards climate support and digital change are promising, but the scale and effects are minor. To provide a sustainable, structural change, Pakistan should move beyond ad hoc privileges and pieces.
Pakistan’s economic stability is an important achievement. It offers an opportunity window for improvement. In the absence of a decisive axis towards competition, innovation and institutional power, the promise of stability falls into another. At present, it is primarily on policy makers and the private sector to seize the moment and create a truly flexible and dynamic economy.
Author is the Research Associate at Sustainable Development Policy Institute
