Pakistan’s economy experienced a marked improvement in macroeconomic stability during FY25, driven by prudent monetary management, fiscal discipline, and targeted policy measures. The latest Governor’s Annual Report (GAR) 2024–25 released by the State Bank of Pakistan underscores this recovery while warning of emerging global and domestic risks that could influence future economic performance.
The GAR, published under Section 39 (1) of the SBP Act, 1956, is a legally mandated document submitted annually to Parliament. It provides a comprehensive review of monetary policy, the state of the financial system, and the overall economy. The FY25 edition reveals a sharper disinflationary trend, steady external account improvement, and enhanced resilience across key sectors of the economy.
Inflation saw a steep decline to an average of 4.5 percent in FY25 from 23.4 percent in FY24 and 29.2 percent in FY23. The report attributes this drop to improved food availability, lower international commodity prices, and downward adjustments in energy tariffs supported by a softening of global oil prices. This disinflationary environment allowed the Monetary Policy Committee to reduce the policy rate by a cumulative 1,100 basis points between June 2024 and June 2025.
However, the report cautions that risks remain. Sticky core inflation in the second half of FY25, evolving global tariff policies, rising geopolitical tensions, and volatility in administered energy prices led to a slower pace of monetary easing in H2-FY25. SBP noted that maintaining a measured stance was essential to support credit expansion and economic recovery while preserving hard-earned macroeconomic stability.
Fiscal consolidation continued to reinforce monetary efforts. The fiscal deficit narrowed to a nine-year low of 5.4 percent of GDP, while the primary surplus more than doubled to 2.4 percent. This fiscal discipline, combined with monetary easing, supported private sector credit growth and economic revival in the latter part of the fiscal year.
A significant development came on the external front as the current account balance posted a surplus for the first time in 14 years. The surplus, along with inflows under the International Monetary Fund Extended Fund Facility, strengthened foreign exchange reserves and stabilized the FX market. SBP’s active foreign exchange purchases from the interbank market helped maintain confidence and build buffers.
The GAR also outlines the central bank’s efforts to strengthen the financial ecosystem. Reforms in exchange companies, enhanced incentives for banks, and targeted diaspora outreach supported remittance flows. Exporters, particularly in the IT sector, benefited from improved retention limits, enabling reinvestment and innovation.
On the digital front, SBP made notable progress in expanding digital payment acceptance infrastructure nationwide, accelerating the shift toward a cashless economy. The report highlights the implementation of the National Financial Inclusion Strategy 2024–28, which aims to boost financial inclusion to 75 percent and reduce the gender gap to 25 percent by 2028. Initiatives such as the National Financial Education Roadmap 2025–29, Banking on Equality, and targeted support for Islamic banking, agriculture, and SMEs further expanded access to finance.
The report also recognizes ongoing reforms in taxation, customs tariffs, deregulation of agricultural markets, and the gradual withdrawal of untargeted subsidies. SBP emphasized that sustained structural reforms are essential for maintaining price stability and financial strength over the long term.
GAR FY25 flags major external and domestic risks ahead. Global trade policy shifts, geopolitical uncertainty, and recent flood damage in Pakistan could test the economy’s resilience. SBP reiterated its commitment to closely monitoring these risks and adjusting its policy stance to protect economic stability.
The report concludes that while FY25 marked a decisive step toward stabilization, achieving durable growth requires steadfast policy implementation, stronger governance, and continued collaboration between fiscal and monetary authorities.
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