Karachi: Pakistan's economy showcased a robust performance in the fiscal year 2025, marked by significant macroeconomic improvements and strategic financial developments. According to an annual economic review released by Meezan Bank Limited, the country's participation in a 37-month International Monetary Fund's (IMF) Extended Fund Facility (EFF) program worth USD 7 billion was instrumental in stabilizing its macroeconomic framework.
The review highlights that the fiscal year concluded with Pakistan securing an additional 28-month arrangement under the IMF's Resilience and Sustainability Facility (RSF) program, valued at USD 1.4 billion. These financial interventions have contributed to a current account surplus and a marked decline in inflation, which averaged 4.5% in FY25, down from 23.4% in the previous fiscal year. This decline, attributed to a high base effect, stabilization of food and oil prices, and a stable rupee, facilitated the State Bank of Pakistan (SBP) to lower the policy rate from 22% to 11% over the fiscal year.
Despite a modest 2% depreciation of the Pakistani Rupee, the country's foreign exchange reserves increased by USD 5.1 billion, reaching USD 14.5 billion by the end of FY25. This growth occurred alongside the successful repayment of approximately USD 10 billion in debt and a current account surplus of USD 2.1 billion, contrasting with the deficit recorded in the prior year.
Fiscal consolidation efforts resulted in the deficit shrinking from 6.8% to 5.6% of GDP, with gross revenue increasing by Rs. 4.3 trillion. Although the Federal Board of Revenue (FBR) fell short of its budgeted target, it recorded a 26% increase in collection, amounting to Rs. 11.7 trillion. Non-Tax Revenue saw a significant 61% increase, driven by SBP's profits and petroleum levy collection.
The Pakistan Stock Exchange (PSX) also witnessed substantial activity, with the issuance of its first Green Sukuk, raising Rs. 32 billion and surpassing its initial target. According to information available from the Pakistan Stock Exchange (PSX), this move demonstrated strong market demand for Shariah-compliant instruments. The KSE-100 index achieved a record high, closing at 125,627 points, reflecting a 60.15% increase, while the KMI-30 Index saw a 46.24% rise.
Equity markets benefited from increased liquidity inflows, with average daily traded volumes reaching 633 million shares, a 37% year-over-year increase. Mutual funds were significant net buyers, contributing USD 232 million, while foreign corporates were net sellers, offloading USD 329 million. Key sectors such as Cement, Oil & Gas Exploration, and Fertilizers emerged as major positive contributors to the KMI-30 index, while sectors like Investment Companies and Power Generation underperformed.
The economic review underscores a significant improvement in Pakistan's credit ratings by Fitch and Moody's, with the latter upgrading the outlook from 'Stable' to 'Positive'. Despite geopolitical challenges and global market dynamics affecting sentiment, Pakistan's economy demonstrated resilience, buoyed by domestic macroeconomic reforms and investor confidence.