The Government of Pakistan is anchoring its long-term economic strategy on sustained macroeconomic stability, comprehensive structural reforms, and private-sector-led growth, with key indicators demonstrating measurable recovery over the past two to three years. Adviser to the Finance Minister Khurram Schehzad outlined these developments while delivering the keynote address at a seminar titled “Pakistan Economic Outlook: FY2027 and Beyond” held at a local hotel in Lahore. The session brought together prominent economists, corporate leaders, and financial sector experts, including Dr. Ali Hasanain, Ali Khizer, and Khurram Husain, to review national macro-fiscal performance and future reform trajectories.
Reviewing the macro-fiscal landscape, Khurram Schehzad stated that the national economy has transitioned away from severe contraction and external vulnerability toward structural stabilization. Real gross domestic product growth recovered from negative territory to reach 3.7 percent, driven by broad-based gains across key real sectors. Agricultural growth expanded to 2.89 percent, surpassing its 25-year historical average, while Large-Scale Manufacturing posted a four-year high growth rate of 6.1 percent. Concurrently, the services sector recorded an expansion of 4.4 percent. On the fiscal side, the budget deficit was contained below one percent of GDP over a nine-month period, with the full-year figure projected to stabilize near 3 percent, representing a sharp reduction from 8 percent recorded in 2022.
The primary fiscal balance posted a record surplus, while the total national debt-to-GDP ratio dropped from 75 percent down to 68 percent, a shift attributed to disciplined fiscal management in accordance with statutory debt limits. On the external account, the current account deficit narrowed significantly to under 150 million dollars, compared to 17.5 billion dollars in 2022, while headline inflation eased to 7.5 percent. State Bank of Pakistan foreign exchange reserves rose from a critical low of 3 billion dollars in early 2023 to 18 billion dollars, providing over three months of import cover. Schehzad highlighted that this reserve accumulation resulted primarily from organic inflows rather than fresh external borrowing, with total public external debt holding steady near 100 billion dollars. Core drivers of balance of payments stability included record inflows through Roshan Digital Accounts, which crossed 13 billion dollars with monthly averages reaching 300 million dollars, alongside information technology exports of 4.6 billion dollars and freelance earnings of 1.76 billion dollars.
This improved external trajectory gained recognition from global rating agencies, with S and P upgrading the sovereign credit rating of Pakistan to B with a stable outlook. On the institutional front, Schehzad detailed progress across eleven core reform areas intended to diminish direct state involvement in commercial activity and foster market competition. Regarding state-owned enterprise restructuring, he noted 28 active privatization transactions, including the completed bidding phase for Pakistan International Airlines alongside ongoing transactions for First Women Bank, House Building Finance Corporation, and power distribution companies. Furthermore, a Competitive Trading Bilateral Contract Market framework is being introduced to eliminate single-buyer monopolies within the power sector. In tax administration, the Federal Board of Revenue is transitioning toward a faceless, multi-tiered digital operating framework designed to remove discretionary assessment powers, while broader government rightsizing efforts include winding down loss-making entities like PASCO and PWD, shifting civil service pensions to defined-contribution models, and deregulating tariffs to lower input costs for exporters.
Fiscal policies are being aligned to encourage private capital formation and industrial expansion. Private sector credit grew by 1.46 trillion rupees, reflecting a 15 percent year-on-year increase, reinforced by agricultural credit disbursements of 2.7 trillion rupees. The domestic stock market recorded 11 initial public offerings over the past year, marking a 20-year high, while total corporate registrations surpassed 43,000 for the year. To bolster export competitiveness, recent budgetary measures provided targeted tax relief, including the removal of the super tax for corporates generating profits below 500 million rupees, a reduction in turnover tax to 1.25 percent, and lower energy tariffs during off-peak hours. The Economic Coordination Committee also approved an export refinancing facility offering concessional financing at 4.5 percent for small and medium-sized exporters. Looking ahead, the government is finalizing a Comprehensive Industrial Policy to scale manufacturing efficiency alongside a Medium-Term Tax Policy to provide long-term predictability for domestic and international investors.
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