The Finance Division has projected inflation to rise to 3-4% by March 2025. The division’s monthly economic update for February 2025 noted that inflation is expected to remain between 2-3% for the month.
According to the report, Pakistan’s economy showed positive developments during July-January FY2025, with exports increasing by 7.6% to $19.2 billion compared to $17.8 billion last year. Imports rose by 10.9%, reaching $33.3 billion, leading to a trade deficit of $14.1 billion, up from $12.2 billion in the previous year. Service exports stood at $4.7 billion, while service imports increased to $6.7 billion, resulting in a services trade deficit of $1.9 billion.
The report highlighted a decline in the Large-Scale Manufacturing (LSM) sector, which contracted by 3.7% year-on-year in December 2024, compared to a 3.1% growth in the same month last year.
During the first half of the fiscal year 2025, LSM posted a 1.9% decline, widening from a 1% contraction in the corresponding period of fiscal year 2024. However, on a month-on-month basis, LSM grew by 19.1% in December 2024.
Workers’ remittances recorded a strong inflow of $20.8 billion, reflecting a 31.7% increase compared to $15.8 billion last year, with Saudi Arabia and the UAE being the top contributors. In the coming months, remittances are likely to increase further due to seasonal factors such as Ramadan, Eid-ul-Fitr and Eid-ul-Adha.
Foreign Direct Investment (FDI) net inflows stood at $1.52 billion, marking a 56.2% increase, with China leading at $633.6 million, followed by Hong Kong and the UK.
The fiscal deficit reduced to 1.2% of GDP (Rs1,537.9 billion) from 2.3 percent of GDP (Rs2,407.8 billion) last year. A primary surplus of Rs3,603.7 billion (2.9% of GDP) was recorded, up from Rs1,812.2 billion (1.7 percent of GDP) last year, aided by restrained non-markup spending and improved revenue collection. Total revenues grew by 42.5% to Rs9,763.8 billion, with tax collection increasing by 25.5% and non-tax revenues rising by 83%.
The report noted an improvement in the external sector, driven by increased exports and remittances. Foreign exchange reserves stood at $15.9 billion as of February 14, 2025, with the State Bank of Pakistan holding $11.2 billion. The central bank cut the policy rate by 100 basis points to 12 percent on January 28, 2025, bringing the cumulative reduction since June 2024 to 1,000 basis points.
In the agriculture sector, wheat has been sown on 22.07 million acres for the Rabi season, with an expected production of 27.9 million tonnes. Agricultural credit disbursement rose by 8.5% to Rs925.7 billion, supporting the annual target of Rs2,572.3 billion. However, according to PMD’s weather outlook, the relatively dry conditions may cause water stress for Rabi crops, especially wheat in rain-fed areas.
The import of agricultural machinery grew by 42.5% to $69.2 million, indicating a rising focus on mechanisation. Urea offtake increased by 6%, while DAP offtake rose by 17.7% compared to the previous Rabi season.
The Pakistan Stock Exchange remained volatile in January 2025, with the KSE-100 index closing at 114,256 points. Market capitalisation stood at Rs14,054 billion. Meanwhile, 63,559 workers were registered for overseas employment in January 2025, compared to 60,694 in January 2024.
Under the Benazir Income Support Programme (BISP), Rs232.2 billion was disbursed during July-December FY2025, reflecting a 26.4% increase from last year. Additionally, the Pakistan Poverty Alleviation Fund, in collaboration with 24 partner organizations, distributed 20,573 interest-free loans worth Rs979 million in January 2025. Since 2019, a total of 2.93 million interest-free loans amounting to Rs113.3 billion have been provided.
The report also highlighted that private sector borrowing rose to Rs958.1 billion, a significant increase from Rs239.3 billion last year, while the government retired Rs1,074.7 billion in budgetary support loans. The external sector outlook remains positive, with an expected continuation of foreign inflows, export growth, and remittance support in the coming months.
The monthly economic update noted that exports and imports are projected to improve due to the expansion in economic activity. These factors will help to keep the current account deficit within manageable limits.
Similarly, with contained non-markup expenditures, the primary surplus is expected to improve further in the coming months. On the external front, exports, imports, and workers’ remittances are expected to maintain their upward trend.
