Pakistan’s economy shows strongest signs of recovery since 2018

As tensions with India escalate and war clouds loom over the region, Kamran Khan offered a rare dose of optimism in his latest vlog, pointing to what he called a “remarkable economic milestone” for Pakistan.

Khan said that despite the geopolitical uncertainty, Pakistan's economy is showing signs of significant recovery — the most promising since 2018.

He credited the International Monetary Fund (IMF) program for instilling a new sense of discipline in Pakistan's financial management. “Almost all economic indicators now reflect a renewed commitment, a new strategy, and a new economic discipline,” Khan said.

According to Khan, inflation has dropped nearly sixfold over the past year, with average inflation now hovering at just 4.8%, down from 28% in 2024. Interest rates have also been slashed in half, going from 22% to 11% in one year.

He emphasized that the fundamentals behind this drop are “solid,” citing lower energy rates, a stable Pakistani rupee, and declining prices of wheat, vegetables, and fruits.

One of the biggest factors driving this economic improvement, Khan said, is the sharp fall in global oil prices. Brent crude is currently priced at $60 per barrel — down from $90 a year ago and $110 in 2022.

“This is nothing short of a jackpot for Pakistan’s import-based economy,” Khan said.

He estimated that the country could save up to $6 billion on its oil import bill this year, significantly easing fiscal pressure and reducing the burden of energy subsidies.

Energy costs for consumers and industries have already begun to fall. Domestic electricity rates have dropped by PKR 7 per unit, while industrial tariffs are down 20%.

Lower inflation has also given the State Bank of Pakistan room to ease monetary policy. Just this week, the bank cut the policy rate by 100 basis points, surprising analysts who expected a smaller adjustment.

“The KIBOR rate for six months has come down to 11.44%, from 12.08%,” Khan reported, predicting that cheaper loans will now encourage industrial expansion and stock market investments.

Pakistan’s stock market has responded positively, with the KSE-100 index surging 56% year-over-year. It stood at 72,000 points in May 2024 and now closes above 113,000. Last month, the index hit a record high of 120,000 points.

Khan also noted that the Pakistani rupee has remained largely stable against the U.S. dollar over the past 15 months, fluctuating narrowly between PKR 278 and PKR 281. He attributed this to consistent management by the central bank, which has restored investor confidence and reduced fears of dollarization.

Remittances, another major source of foreign exchange, have surged by 33% so far in the fiscal year, reaching $28 billion. March alone saw a record-breaking $4.1 billion in remittances, helping the country post a $1.19 billion current account surplus — the highest in Pakistan’s history.

“The finance minister has projected a current account surplus for the full year,” Khan added, citing comments made by Muhammad Aurangzeb at a recent pre-budget seminar in Karachi.

Still, not all indicators are rosy.

Khan pointed out that while the Federal Board of Revenue (FBR) collected PKR 9.3 trillion in taxes from July to April — a 26.3% increase from the previous year — it still missed its target by PKR 833 billion.

He also raised concerns about the growing trade deficit. Pakistan's exports rose by 6.25% to $26.86 billion, but imports grew by 7.4% to $48.2 billion, pushing the trade deficit to $21.4 billion in 10 months.

Despite those challenges, Khan remained upbeat. He said Pakistan’s GDP growth, which struggled to reach 2% in 2024, is now projected to hit 3.5% next year. Some international economists believe it could climb as high as 4.5%, assuming political stability continues and oil prices stay low.

In a positive sign, the IMF this week described Pakistan’s macroeconomic stability as showing “marked improvement.” But the lender also cautioned that structural reforms remain essential, particularly in tax collection, power sector governance, and the privatization of state-owned enterprises.

“This is not just talk,” Khan insisted. “This is data-backed progress.”

Ending on a hopeful note, Khan said that if the current trends hold — and political calm prevails — Pakistan has a “golden chance” to enter a new phase of economic recovery.