Pakistan’s economy has made an unexpected recovery, earning praise from Barron’s, which described it as “macroeconomic miracle of sorts.” Inflation, which hit a staggering 38 per cent in May 2023 has plummeted to 0.3 per cent by April 2025. Alongside, investor confidence surged, with the value of Eurobonds maturing in 2031 more than doubling, and the Pakistan Stock Exchange index tripling.
A significant factor behind this is the \$7 billion stabilisation package agreed with the International Monetary Fund (IMF) in 2024, with more than \$2 billion already disbursed. The government has also posted current account surplus and a primary fiscal surplus—rare feats for the country.
Interest rates, which had been raised to 22 per cent to combat inflation, have since been reduced to 11 per cent. Meanwhile, Pakistan’s key lenders, including China, Saudi Arabia, and the UAE, have rolled over their existing loans, although none have extended new credit.
Despite these positive developments challenges remain. Pakistan still relies on external borrowing and remains under the IMF’s watchful eye. The IMF has pushed for reforms including increasing tax revenues and reducing expensive electricity subsidies—measures that will be difficult for the government to implement politically.
The country also faces challenge of diversifying its exports. Currently, two-thirds of Pakistan’s exports are low-value goods like cotton and cereals. While IT exports have grown to \$3 billion, they are still a far cry from rivals like India, whose tech exports total $200 billion.
Investor sentiment remains divided. Some, like Sandglass Capital, have moved on, citing reduced risk, while others such as Barings and Voltan Capital remain cautiously optimistic but warn of risks.
As one analyst put it, “The government knows it’s walking a tightrope. If they slip, there may be no one left to catch them.”
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