The Ministry of Finance said that the effectiveness of an optimal policy mix, including fiscal consolidation, targeted interventions by the State Bank of Pakistan (SBP), and exchange rate stability, along with favorable external conditions, contributed to a significant decline in inflation in H1-FY2025, as Consumer Price Index (CPI) inflation dropped to 7.2 percent from 28.8 percent a year earlier.
The Finance Division’s Half-Yearly Economic Report noted that inflation had remained elevated at 23.4% in FY2024 after peaking at 29.2% in FY2023. However, urban food inflation fell sharply to 2.7% from 33.2%, while rural food inflation dropped to 0.4% from 33.2%. Non-food inflation also declined, with urban areas recording 13.2% compared to 24.4% last year, and rural areas at 10%, down from 26.2%. Lower energy prices and a stable exchange rate played a key role in reducing transportation and production costs.
Report noted that Pakistan’s economy showed signs of continued recovery, with GDP expanding by 2.5% in FY2024 following a contraction the previous year. The agricultural sector grew by 6.2%, benefiting from increased investment and favorable weather conditions, while the industrial sector showed mixed performance. The services sector maintained its positive trajectory, supported by domestic activity and trade growth.
The current account recorded a $1.21 billion surplus in July-December FY2025, with remittances and exports offsetting the rising import bill. Foreign Direct Investment (FDI) increased by 20%, particularly in the power and oil sectors, while foreign exchange reserves remained sufficient to cover over two months of imports. The Pakistani rupee appreciated by 1.2%, reflecting improved external conditions.
The fiscal deficit improved to 0.04% of GDP in July-November FY2025, supported by higher tax revenues, stable exchange rates, and lower interest rates. With inflation easing and investor confidence strengthening, Pakistan is expected to sustain growth momentum through FY2025.Â
It said that the government’s URAAN Pakistan economic transformation plan aims to further stabilize the economy by focusing on export facilitation, monetary easing, and private-sector-led growth.
