Karachi: In a year marked by significant macroeconomic changes, Pakistan has demonstrated notable resilience by stabilizing its economic landscape through strategic reforms and external financial support. The fiscal year 2025 showcased the country's economic turnaround, highlighted by a current account surplus, reduced inflation, and a stable currency. This transformation was significantly driven by Pakistan's engagement with the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).
In September 2025, Pakistan concluded its fiscal year with a current account surplus of USD 2.1 billion, a marked improvement from a deficit of the same amount the previous year. This positive shift was bolstered by a 27% increase in remittances to USD 38.3 billion, countering a 21% rise in the trade deficit. The robust remittance growth is attributed to a stable exchange rate and measures against illegal money transfers. According to information available from the Pakistan Stock Exchange (PSX), the fiscal deficit narrowed to 5.6% of GDP from 6.8% in the previous year, aided by a revenue increase of Rs. 4.3 trillion and controlled spending growth of PKR 2.4 trillion.
Pakistan's inflation rate witnessed a substantial decline, averaging 4.5% in FY25, down from 23.4% in FY24. This improvement allowed the State Bank of Pakistan (SBP) to reduce the policy rate from 22% in June 2024 to 11% by May 2025. The Pakistani Rupee exhibited stability with a modest 2% depreciation, supported by a USD 5.1 billion increase in foreign exchange reserves, reaching USD 14.5 billion by the end of the fiscal year.
The government's fiscal strategy included raising Rs. 2,178 billion through Islamic instruments, slightly below the target of Rs. 2,291 billion. The issuance of variable-rate Ijara Sukuk saw substantial investor interest, with a significant portion raised from the 10-year Sukuk. Fixed-rate Ijara Sukuk also attracted strong demand, although the government adopted a cautious issuance approach.
Pakistan's economic environment has garnered positive attention from international credit rating agencies, with Fitch and Moody's both upgrading the country's credit ratings. Moody's further revised Pakistan's economic outlook from 'Stable' to 'Positive', reflecting the improved macroeconomic conditions.
The fiscal year ended with a notable monetary easing trend, driven by the SBP's accommodative stance amidst improving macroeconomic indicators. Despite potential risks like an expanding trade deficit and global geopolitical tensions, the government maintained steady interest rates towards the end of the year.
In FY25, the PSX marked a milestone by issuing its first Green Sukuk, raising Rs. 32 billion, surpassing its initial target, and showcasing strong market appetite for Shariah-compliant instruments. This issuance highlights Pakistan's ongoing efforts to diversify its financial instruments and tap into sustainable finance options.