PAKISTAN’S ECONOMIC RENAISSANCE: FROM BRINK OF COLLAPSE TO UNPARALLELED RECOVERY IN FY24
Maria Mansab
07 June 2024
Envision an economy teetering on the edge of collapse and insolvency. Now see the same economy swiftly recovering within one year. This is the tale of Pakistan in fiscal year 2024, a tale characterized by perseverance, strategic foresight, and unparalleled economic expansion. Pakistan’s economy has experienced significant fluctuations this year, with both unprecedented declines and remarkable increases. Now, let’s examine the specific activities taken to turn a possible disaster into a symbol of stability and assurance.
In the fiscal year 2024, Pakistan’s actual GDP witnessed significant expansion, increasing by 2.38% compared to 0.29% in the fiscal year 2023. The significant gain was driven by strong backing from the agriculture sector, along with a noticeable increase in manufacturing activity and expansion in the services sector. Furthermore, this expansion had a measurable effect on the average income per person, which increased by 8% in FY24, reaching $1,680 compared to $1,551 in FY23. The substantial increase in income indicates a notable enhancement in the quality of life for the people of Pakistan.
The exceptional performance of the agriculture sector was essential in stimulating the overall economic growth, exceeding the projections established by international organizations like the IMF, ADB, and the World Bank. Wheat output experienced a notable growth of 11.64%, cotton saw a remarkable surge of 108.22%, rice witnessed a substantial gain of 34.78%, and livestock showed a modest rise of 3.89%. Additionally, the manufacturing sector experienced a significant improvement, with a growth rate of 1.21% compared to a drop of -3.74% in the previous year. In a similar vein, the services sector exhibited strong resistance, with a growth rate of 1.21% compared to a negligible growth rate of -0.01% prior.
With a significant development, In the fiscal year 2024, Pakistan’s monetary system demonstrated stability and a notable reduction in the risks associated with the economy. The State Bank plans to lower its Policy Rate starting at the beginning of FY25, to reach a level below 20%, as inflation gradually decreases. The decrease in policy rates has led to a dip in secondary rates and loan rates, as inflation has slowed down and currency parity has remained stable. As a result, Pakistan’s inflation declined to a 22month low of 17.3% year-on-year in April 2024 and is projected to reduce to approximately 14% in May 2024. These advancements lead to a growing trend of favorable real interest rates.
Due to increased inflows, intensified efforts by law enforcement agencies to combat smuggling, and institutional initiatives by SBP, the exchange rate experienced a significant 3% gain in FY24, in striking contrast to the 39% decrease observed in FY23. It is imperative to mention here that Pakistan’s foreign exchange reserves have reached a 10-month high as of April 24th, amounting to US$ 9.15 billion. As experienced a significant gain of 15.7% in comparison to the preceding year’s 257%. Simultaneously, Pakistan’s equity market has experienced a significant surge, making it one of the top-performing worldwide markets with an astounding total index return of 83%. The market value has experienced significant growth, increasing from US$22 billion in FY24 to an outstanding US$37 billion currently. These positive developments have resulted in a higher amount of foreign currency assets, comparatively improved access to foreign financing, and an enhanced level of liquidity in the system.
During the initial 10 months of fiscal year 2024, foreign direct investment (FDI) had a notable 8% year-on-year increase, reaching a cumulative sum of US$1.46 billion. This represents a notable enhancement in contrast to the 16% decrease encountered in the preceding fiscal year. The upward trajectory is a distinct sign that investors have gained greater faith in our economy.
In the fiscal year 2023-2024, Pakistan experienced a remarkable 62% increase in its IT exports, reaching an unprecedented amount of US$ 310 million in April. This figure represents the greatest export value ever achieved in a single month. Experience the extraordinary ascent of Pakistan’s IT industry in this astonishing tale of triumph. Significantly, in only 10 months during the fiscal year 2024, food exports reached a recordbreaking amount of US$ 6.8 billion. The jump was driven by a significant increase in rice and maize exports.
Furthermore, Pakistan’s unwavering dedication to investment packages with Saudi Arabia and the UAE, amount to US$5 billion and US$10 billion respectively. China has so far invested about 65 billion dollars in energy and infrastructure projects in Pakistan through CPEC. It highlights the country’s determination to bolster economic connections and attract substantial foreign investments to ensure long-term and sustainable development. These favorable advancements collectively depict a promising perspective for Pakistan’s economic path, with actions focused on promoting growth, attracting investments, and improving governance.
Pakistan’s economic turnaround in FY24 is a testament to resilience and strategic reform, marked by significant GDP growth fueled by robust performances in agriculture, manufacturing, and services. This recovery is further highlighted by increased foreign direct investment, record-breaking IT and food exports, and a thriving equity market. The stability in the monetary system, with notable gains in exchange rates and net foreign assets, reflects improved economic confidence. Strategic investments and partnerships with countries like Saudi Arabia, the UAE, and China underscore Pakistan’s commitment to long-term growth. Overall, Pakistan’s swift recovery from near collapse to economic stability within a year demonstrates its dedication to sustainable development and prosperity.
