Pakistan’s economic boom in the first quarter of FY-25

15 October 2024

Published in: Pakistan Observer

Pakistan’s economy witnessed a remarkable boost in the first quarter of the fiscal year 2025 (Q1-FY25), with significant growth driven by remittances, a record-breaking performance of the stock market, an increase in foreign direct investment, and a surge in startup investments. This positive economic outlook is supported by the pivotal role played by the Special Investment Facilitation Council (SIFC) in creating a stable environment for investment and growth.

According to the State Bank of Pakistan, the country received $8.8 billion in remittances during this period, reflecting a substantial increase of 38.8 percent compared to $6.33 billion in the same quarter last year (Q1-FY24).

A breakdown of the remittance sources shows that Saudi Arabia remained the largest contributor, with $681.3 million in remittances. Following closely were the United Arab Emirates with $560.3 million, the United Kingdom with $423.6 million, and the United States with $274.9 million.

While remittances have served as a lifeline, the Pakistan Stock Exchange (PSX) performance has further fueled optimism. The KSE-100 index, the benchmark for the country’s stock market, achieved an all-time high, touching 86,437points in intraday trading, compared to 46,627 points in October 2023. This surge follows an impressive recovery, showcasing the resilience of the market. Notably, the Pakistan Stock Exchange (PSX) has been recognized as the world’s best-performing stock market for 2024 by Bloomberg.

The rapid recovery of the PSX can be attributed to a combination of factors, including a higher-than-expected decline in the inflation rate, which dropped to 6.9% in September. This reduction in inflation has raised hopes for a further cut in the central bank’s policy rate, which currently stands at 17.5%. The upcoming Monetary Policy Committee (MPC) meeting in November is now eagerly anticipated, as many investors expect a potential rate cut that could further fuel economic activity and investor confidence.

Key contributors to the PSX’s record performance included major companies such as MCB Bank, Lucky Cement Limited (LCI), Bank AL Habib Limited (BAHL), Hub Power Company (HUBC), and Habib Bank Limited (HBL). These firms collectively added 292 points to the index, underscoring the vital role of corporate performance in driving market trends.

Volume leaders at the PSX further illustrate the heightened trading activity. K-Electric Ltd recorded the highest trading volume, with 55.8 million shares exchanged, followed by Hub Power Co.XD with 39.67 million shares, and PTCL with 32.23 million shares. This high trading volume reflects robust market liquidity and a growing interest among domestic and international investors alike.

Adding to the positive momentum in the financial sector is the strong growth in Pakistan’s startup ecosystem, which saw an unprecedented rise in investments in 2024. The year witnessed a staggering 650% increase in investments in the startup sector, with four major deals raising a total of $15.4 million. DealCart led the way by raising $3.4 million, followed by Zyp with $1.5 million, PostEx securing $7.3 million, and Qist Bazar raising $3.2 million.This surge in startup funding is a significant milestone for Pakistan’s innovation landscape, reflecting the growing interest in technology-driven solutions and the potential for further economic growth through entrepreneurship.

Moreover, Pakistan’s startup ecosystem garnered international recognition as two Pakistani companies—DealCart and NayaPay—were named in Forbes Asia’s prestigious “100 to Watch” list. This acknowledgment highlights the country’s increasing presence on the global startup stage, signaling a bright future for its tech-driven ventures and further attracting international attention to Pakistan’s burgeoning innovation sector.

Pakistan’s economic landscape is also set to receive a substantial boost from foreign direct investment (FDI), with the country expected to secure over $27 billion in FDI from Asian and European nations in the coming years. The establishment of the Special Investment Facilitation Council (SIFC) in 2023 has played a pivotal role in streamlining decision-making and attracting investment, particularly in critical sectors such as minerals, information technology (IT), defense, and agriculture.

Among the most prominent investors, Saudi Arabia has pledged $5 billion in investments, while the UAE and Kuwait are expected to contribute $10 billion each. These commitments are a testament to Pakistan’s growing appeal as a destination for foreign capital, driven by its vast natural resources, strategic location, and improving regulatory framework. Azerbaijan has also expressed interest in investing $2 billion, further broadening the scope of international partnerships that are poised to inject much-needed capital into Pakistan’s economy.

The first quarter of FY25 has been a period of significant economic achievements for Pakistan. The surge in remittances, the unprecedented performance of the stock market, the impressive rise in startup investments, and the influx of foreign direct investment present a positive outlook for the country’s economic future. With inflation under control, investor confidence on the rise, and growing recognition of its startups on the global stage, Pakistan is well-positioned to leverage these gains and build a more resilient and diversified economy. As Pakistan continues to attract international investment and strengthen its economic fundamentals, it is poised to emerge as a key player in the regional and global economy.