PAKISTAN’S ECONOMIC REVIVAL: FITCH RATING UPGRADE HIGHLIGHTS SURGE IN KEY INDICATORS

Maria Mansab

30 July 2024

Pakistan’s economic resurgence is drawing significant global attention, a testament to its remarkable turnaround in recent years. This transformation is highlighted by Fitch Ratings’ recent decision to upgrade Pakistan’s credit rating from ‘CCC’ to ‘CCC+.’ This positive shift is more than just a numerical change; it marks a pivotal moment for the country, reflecting a newfound confidence in Pakistan’s economic stability and growth potential. The upgrade underscores the significant strides Pakistan has made in stabilizing its economy, managing external and fiscal challenges, and laying the groundwork for sustainable growth.
As key economic indicators tell a compelling story of resilience and progress, Pakistan’s success in these areas showcases a well-rounded approach to economic management. The comparison between FY2021-22 and FY2023-24 reveals significant improvements across several fronts: exports, imports, trade deficit, fiscal deficit, current account deficit, agricultural sector growth, Federal Board of Revenue tax collections, remittances, foreign direct investment, foreign exchange reserves, the KSE-100 Index, and deposits in the Roshan Digital Account initiative. These positive trends have been tantamount to the Fitch rating upgrade, painting an appealing picture of Pakistan’s economic health and stability. This revitalization is not just about numbers; it signifies a broader transformation in economic policy and governance, setting a promising course for Pakistan’s future.
In FY2021-22, Pakistan’s Exports were valued at $26.8 billion. By FY2023-24, this figure had increased to $30.64 billion, reflecting a significant enhancement in the country’s export performance. Pakistan’s exports are expected to register over ten percent growth and reach around $31 billion in the current fiscal year 2023-24. This growth underscores the strengthening of Pakistan’s external sector, which is crucial for sustaining economic stability and growth. Improved export performance contributes positively to the balance of payments, demonstrating the country’s competitive edge in global markets.
In FY2021-22, Imports were at $58.9 billion, whereas in FY2023-24, imports decreased to $43.4 billion, marking a significant reduction. This decline in imports has led to a more manageable trade balance and highlights the country’s effective import regulation and economic adjustments.
In FY2021-22, the Trade Deficit stood at $32.9 billion and in FY2023-24, this figure had been halved to $17.7 billion. This significant reduction indicates more balanced trade dynamics and reflects improved economic management. The substantial decrease in the trade deficit demonstrates Pakistan’s success in addressing trade imbalances and enhancing overall economic stability.
In FY2021-22, Pakistan’s Fiscal Deficit stood at 3.8% of GDP, however, by FY202324, the fiscal deficit decreased to 3.7%. This improvement underscores the country’s progress in enhancing fiscal discipline and managing its budget more effectively. The reduction in the fiscal deficit indicates better control over public spending and revenue generation. Overall, this positive trend highlights Pakistan’s commitment to achieving more sustainable fiscal management.
In FY2021-22, the Current Account Deficit was $13.8 billion. By FY2023-24, this figure had been significantly reduced to $0.5 billion. This sharp decrease showcases the effectiveness of Pakistan’s fiscal and monetary policies. Such a significant reduction highlights the success of the government’s measures in enhancing economic stability and mitigating external vulnerabilities.
In FY2021-22, the Agricultural Sector experienced a growth rate of 4.40%. However, in FY2023-24, this growth had increased to 6.25%, indicating a significant boost in productivity and investment within this vital sector. This growth is crucial as agriculture forms the backbone of Pakistan’s economy, contributing to food security and rural employment. The increase reflects successful initiatives to enhance agricultural efficiency and support rural development.
In FY2021-22, the Federal Board of Revenue (FBR) collected Rs 4,855.8 billion in taxes. Significantly, by FY2023-24, tax collections had surged to Rs 9,306 billion, demonstrating a substantial increase in revenue generation. This growth highlights enhanced tax compliance, improved economic activity, and more effective tax administration. The rise in tax collections supports the government’s ability to fund public services and infrastructure projects.
In FY2021-22, Remittances to Pakistan were $26.1 billion, and remarkably in FY2023-24, Remittances rose by over 10pc to $30.3 billion, providing a steady source of support for the economy. The increase in remittances plays a crucial role in bolstering foreign exchange reserves and cushioning the economy against external shocks. It reflects the strong connections between the Pakistani diaspora and their home country, contributing to economic stability.
In FY2021-22, Foreign Direct Investment (FDI) was $1.25 billion. By FY2023-24, this figure had grown to $1.729 billion, indicating increased foreign investor confidence in Pakistan’s economic prospects. The rise in FDI highlights the country’s improved investment climate and attractiveness as a destination for global investors. This investment growth is vital for fostering economic development and creating job opportunities.
In FY2021-22, Pakistan’s Foreign Exchange Reserves stood at $10.9 billion. Whereas, by FY2023-24, these reserves had increased to $14.7 billion, enhancing the country’s economic security and stability. The growth in reserves reflects improved foreign exchange management and stronger economic fundamentals. Increased reserves provide a buffer against external economic pressures and support the country’s ability to meet international financial obligations.
In FY2021-22, the KSE-100 Index, a key indicator of the stock market, was at 44,929 points. However, in FY2023-24, it had surged to 80,672 points, reflecting a significant rise in investor sentiment and market optimism. This increase in the stock market index indicates growing confidence in Pakistan’s economic performance and prospects. The strong performance of the KSE-100 Index is a positive signal of economic health and investor enthusiasm.
In FY2021-22, deposits in the Roshan Digital Account initiative were $4.606 billion. By FY2023-24, these deposits had risen to $8.055 billion, reflecting growing trust in Pakistan’s banking system and financial stability. This notable increase highlights the success of the initiative in attracting investment from overseas Pakistanis. It also underscores the positive perception of Pakistan’s financial sector and its ability to offer secure investment opportunities.
Pakistan’s economic resurgence, underscored by a significant upgrade in its credit rating, paints a compelling picture of progress and stability. The positive trends across various economic indicators—ranging from export growth and reduced trade and current account deficits to increased tax revenues, foreign reserves, and investor confidence—highlight a comprehensive and effective approach to economic management. This revitalization is not merely reflected in numbers but in the broader transformation of Pakistan’s economic policy and governance. As the country continues to build on these achievements, it sets a promising course for sustained growth and stability, positioning itself as a dynamic and resilient player on the global economic stage.