The government on Monday released the Pakistan Economic Survey 2024-25, revealing key figures for the fiscal year ending June. Key among them was the economy expanding by 2.7 per cent during the outgoing year.
The government had initially targeted a GDP (gross domestic product) growth at 3.6pc, but lowered it last month. The International Monetary Fund expects real GDP to grow by 2.6pc in FY25 and for the economy to grow 3.6pc in FY26.
In his foreword to the survey — a key pre-budget document — Finance Minister Muhammad Aurangzeb said Pakistan’s economy had been globally acknowledged for achieving macroeconomic stabilisation in the outgoing fiscal year.
Pakistan is consistently advancing on an upward trajectory, built upon investment-friendly reforms, enhanced domestic savings, and increased foreign direct investment, with GDP growth projected at 5.7pc over the medium term, he said.
Dawn.com spoke to analysts regarding their take on the economic survey, particularly concerning four things: the GDP growth rate, the GDP per capita, the large-scale manufacturing deficit and Pakistan’s tax revenue to GDP.
Here is what they had to say:
Weak demand, high energy costs stalling LSMs
The 2.7pc annual growth figure reflects a sharp rebound of growth in the third quarter, which appears inconsistent with earlier quarterly trends, said Ali Hasanain, an associate professor of economics at LUMS. “Large-scale manufacturing has contracted, and agriculture is practically stationary, with continued concerns about the accuracy of livestock growth numbers.”
He commented that the GDP per capita number, expressed in current USD, was a poor indicator of the welfare of the average citizen at a time when the dollar has stayed in a narrow corridor since the end of 2023. “Until demand normalises and trade grows, we must remain cautious in interpreting indicators expressed in dollar terms.”
Talking about the large-scale manufacturing deficit, he said that it was struggling due to weak domestic demand, import restrictions, and high energy costs. “These are deep, structural issues. Pakistan needs to reorient manufacturing away from assembly operations, trying to ‘save’ dollars by substituting for imports, towards competitive, export-oriented industries.”
“Agriculture, retail, and real estate remain undertaxed. There has been some expression of commitment to rectify this, but the government has little substantial achievement to show in three years so far,” Hasanain added.
Pakistan needs more imports
According to economist Ammar Habib Khan, the GDP growth levels were largely aligned with the consensus. On the other hand, the GDP per capita growth was largely due to “stability of the rupee against the US dollar”.
Khan said that for large-scale manufacturing to grow, Pakistan needed more imports. “And for that, we need more dollars and more demand, which remains compressed.”
On taxes, the macroeconomist commented that the burden was largely covered by salaried taxpayers, indirect taxes and formal industries only.
Lack of engines for growth
Commenting on the statistics unveiled in the economic survey, economist Adil Nakhoda said the GDP growth rate reported is likely driven by the industry sector, which reported a growth of 4.77pc. Interestingly, this was dominated by the wearing apparel segment, which grew by 7.6pc. Apart from crops, the agricultural growth rate was quite limited, while large-scale manufacturing contracted in the fiscal year.
“Although the overall growth rate itself is not much different from the number reported in the previous year, at 2.5pc, the issue is the lack of engines for growth, as it has been limited in only a few sectors and industries. The biggest worry going into the next fiscal year is the large-scale manufacturing index. The import constraints and the lack of competitive pressure need to be reduced to revive industrial growth.”
Commenting on the GDP per capita growth, he said that it was quite surprising as it put the same at around 10pc. “Even though this is the highest since 2021-22, it has typically been higher than the calculation of the GDP growth rate. As this is adjusted for inflation, the decreasing inflation may have contributed to a higher number, as the GDP growth rate was similar.”
He noted that large-scale manufacturing had been hit by not only import constraints but also the lack of competitive pressure in the industry, as several industries in Pakistan had enjoyed protection in terms of high tariff rates and the inability to be globally competitive.
“This has particularly reduced their ability to produce goods and satisfy local demand. There needs to be a dynamic adjustment in the manufacturing sector if we are to expect any growth in it, and that has to come with an increase in competitive pressure to ensure that the manufacturing sector produces goods that can compete not only regionally but globally.”
On Pakistan’s tax revenue to GDP, Nakhoda said that the two major sectors that needed to increase their contribution to taxes were agriculture and retail and wholesale.
“The agriculture sector has always enjoyed tax exemptions that have made its contribution to tax revenue much lower than its contribution to GDP, while the retail and wholesale sector have often evaded the tax net. Their contribution needs to be increased for the burden not only to be shared equally, but the burden to be reduced on other sectors that often contribute a larger share to tax revenue than their contribution to GDP,” Nakhoda added.
Header image: Pakistan Finance Minister Muhammad Aurangzeb shows a copy of the economic survey of fiscal year 2024-2025 during a news conference in Islamabad, Pakistan June 9, 2025. — Reuters
