Ek Saal Bemisaal – a year of economic turnaround

March 10, 2025 (MLN): Pakistan has witnessed an economic resurgence, record-low inflation, a surging stock market, and a declining debt-to-GDP ratio alongside a wave of digital reforms. With rising tax filers and renewed investor confidence, the nation is charting a path toward financial stability and unprecedented growth.

This remarkable progress has been achieved within just one year under Prime Minister Shehbaz Sharif’s leadership, redefining Pakistan’s economic landscape.

During the ceremony “Ek Saal Bemisaal”, Finance Minister Muhammad Aurangzeb outlined these achievements, emphasizing that the country is now borrowing on its own terms, marking a new era of fiscal discipline.

The minister stated that the latest inflation rate stands at 1.5%, the lowest in 9.5 years.

Additionally, Pakistan has achieved the highest primary surplus in 20 years.

The Pakistan Stock Exchange (PSX) has seen remarkable growth, increasing by 47,000 points during this period. Debt-to-GDP, which was previously at 75%, has now declined to 67.5%.

A notable highlight was the entry of 52,000 new investors into the Stock Exchange for the first time. In an unprecedented move, the government has repurchased its 1 trillion debt.

"This is very important to signal to the market that the Government of Pakistan is not a desperate borrower anymore. We will borrow, and we will borrow on our terms," stated the minister.

Foreign exchange reserves have declined to two weeks of import cover, but the minister stressed that the quality of reserves is now more sustainable.

"This is not fueled by the debt stock, but rather through OMO operations by the State Bank of Pakistan," he noted.

The country has also recorded its highest current account surplus in 20 years in the first seven months of FY25.

The currency remains stable, supported by strong export growth and an exceptional performance in remittances.

On the Federal Board of Revenue (FBR), the minister highlighted that Prime Minister Shehbaz Sharif is personally leading the charge.

Last fiscal year, revenues surged by 29% year-on-year, and this year, they have already increased by 26%, exceeding the IMF's target of 10.6% by reaching 10.8% by December.

"Our goal over the next three years is to reach a tax-to-GDP ratio of 13.5% to ensure economic sustainability," the minister stated.

The number of individual tax filers has doubled, with a 100% increase.

High-value filers—those declaring an income of more than 1 million—have risen by 178%, while registered retailers have increased by 174%.

Several technology-driven initiatives have been introduced, including digital production tracking in four key sectors: sugar, tobacco, fertilizers, and cement.

Digital invoicing has been deployed in FMCGs, and the internal system has undergone significant digitization. Faceless customs assessment has also been launched, inaugurated by the Prime Minister.

As a result, the number of Goods Declarations (GDs) filed has dropped by 14%, while average clearance time has decreased from 104 hours to just 21 hours. Revenue has grown by 16%, with tax collection in the sugar sector rising by 54%, contributing over 9 billion to the national exchequer between the last fiscal year and year-to-date.

International institutions and rating agencies have acknowledged Pakistan’s progress. "IMF's managing director has stated that the economy is moving in the right direction with strong reform efforts. We believe in Pakistan's long-term potential and plan to invest $2 billion annually to support growth," said the minister.

The managing director of IFC confirmed an active pipeline of real projects planned for financing this calendar year.

Meanwhile, Fitch and Moody’s have assigned Pakistan a positive outlook, with expectations of achieving a single B category rating within the year.

"This will enable us to regain access to international capital markets," the minister affirmed.

The finance minister underscored the significance of economic stability and structural reforms, emphasizing that tough policy decisions are now being implemented.

The minister stated that these reforms were not just planned over the past year but have been in progress for some time.

He highlighted efforts to right-size the federal government, noting that there are currently 43 ministries with over 400 attached departments.

Recommendations have been provided to 10 ministries regarding mergers and the abolition of certain entities and departments.

The process of right-sizing all ministries is expected to be completed before the end of the current fiscal year.

Addressing state-owned enterprises (SOEs), the minister mentioned that the cabinet committee on SOEs has ratified the privatization of 24 such entities.

Furthermore, he pointed out the pressing issue of unfunded pension liabilities and the government’s proactive approach in addressing them.

In a significant development, Pakistan is working closely with China to access Chinese capital markets through Panda bonds.

The minister expressed optimism that before the year ends, Pakistan will issue its inaugural Panda bond.

Additionally, he outlined the introduction of an agriculture income tax, marking a historic milestone for Pakistan.

Another key reform mentioned was the transfer of the tax policy office from the revenue division to the finance division.

This move, he noted, has been well received by the business community, as it ensures that economic value considerations lead policymaking.

Concluding his speech, the finance minister expressed confidence in the country’s economic future, stating, “The best for Pakistan is yet to come, and collectively, we will make it happen.”

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