Key takeaways
- Inflation hit a historic low of 0.3% in April 2025 and reserves recovered.
- The IMF attached 11 new conditions, including agricultural income tax.
- Growth of about 2.7% is far below what development requires.
- The development budget was cut to about Rs1 trillion while debt service reaches Rs9.8 trillion.
- Revenue from agriculture and real estate, not spending cuts alone, must carry adjustment.
In this Business Recorder column (June 2025), Dr. Ghulam Mohey-ud-din asks whether Pakistan’s much-advertised stabilisation is the start of a recovery or simply a pause between crises.
The argument
The gains are real. The Economic Survey 2024-25 recorded headline inflation of 0.3 percent in April 2025, a primary fiscal surplus of 2 percent of GDP in the first half of the fiscal year, and foreign-exchange reserves of about US$10.3 billion at end-April, projected to reach US$13.9 billion by June. Fitch upgraded Pakistan from CCC+ to B– in April, and the IMF approved a US$1 billion disbursement plus US$1.4 billion under its Resilience and Sustainability Facility in May.
The column argues that these gains are fragile and conditional. The IMF added 11 new conditions, including agricultural income tax and a governance action plan. Growth is expected at around 2.7 percent, with multilateral forecasts of 2.5 to 3.1 percent, far below what a young, fast-growing population needs. Hitting even that required 5.5 percent growth in the final quarter.
Budget choices undermine the story of investment-led recovery: the development programme was cut to about Rs1 trillion, against Rs3 trillion requested and Rs1.4 trillion the year before, while external debt service is projected at Rs9.8 trillion for FY2026. A shadow economy estimated at more than US$500 billion remains largely untaxed.
What needs to change
- Implement reforms with genuine political ownership rather than box-ticking compliance.
- Tax agriculture and real estate instead of relying on spending cuts alone.
- Enforce taxes across the shadow economy.
- Improve state-owned enterprise performance to create room for growth spending.
- Protect social spending transparently while consolidating.