The economy catches a breath but not much more

From a near-crisis marked by skyrocketing inflation, dwindling foreign reserves, devastating floods in 2022–2023, a very real risk of default and an overall bleak state of affairs, Pakistan seems to have managed to engineer a tentative but noteworthy turnaround. Inflation, once as high as 29%, has tumbled to just 1.5% as of February 2025. Foreign reserves, critically low as of last year, have more than doubled. And the agricultural sector, ravaged not long ago, has surged back with record harvests. 

Yet behind these hard-won gains lies a landscape still littered with structural weaknesses; mounting debt, a shrinking industrial base, and the persistent exclusion of women from the workforce. Pakistan’s recovery, fragile as it may be, reflects the complex reality of economic stabilisation in an emerging market, where each step forward requires navigating a minefield of political, fiscal, and social challenges.

Can Pakistan's economy recover after weathering severe economic turbulence? According to the Asian Development Outlook 2025 (ADO), Pakistan's economy regained momentum in fiscal year 2024, as disciplined macroeconomic management and meaningful progress on structural reforms helped stabilise the economy, rein in inflation, and restore investor confidence by attracting much-needed external financing.