GDP Growth
2.68%
Inflation Rate
4.5%
Fiscal Balance
-5.9% GDP
Poverty Rate
35.1%
Pakistanβs economy shows mixed signals with GDP growth at 2.68% - below the regional average but showing recovery. Inflation at 4.5% has been successfully controlled through tight monetary policy. The fiscal deficit of 5.9% of GDP remains a concern, while poverty affects 35.1% of the population.
Key Challenges: External sector vulnerabilities | Low growth momentum | High poverty levels | Fiscal constraints
Positive Trends: Inflation control | Industrial recovery | Export competitiveness improving | Remittance inflows stable
Monetary Policy Assessment
Current Policy Rate: 11.0% (β from 22%)
Policy Effectiveness: - β Inflation successfully brought under control - β Real interest rates now positive - β Exchange rate relatively stable - β οΈ Credit growth remains sluggish
Forecast Insights: - Expected inflation: 4-6% (model-based) - Policy space: Room for further easing - Risk factors: Energy prices, fiscal slippage
Recommendations: 1. Gradual rate cuts to support growth 2. Monitor core inflation closely 3. Maintain exchange rate flexibility 4. Enhance transmission mechanism
Inflation Drivers & Outlook
Main Contributors to Inflation:
π Food Inflation (40% weight) - Volatile due to supply shocks - Climate impact on agriculture - Import dependency for edibles
β‘ Energy Prices (25% weight) - Global oil price transmission - Electricity tariff adjustments - Gas price revisions
π Housing & Utilities (20% weight) - Rental market pressures - Construction material costs - Urban demand growth
π± Exchange Rate Pass-through - Import price effects - Delayed transmission (3-6 months) - Structural import dependency
Policy Implications: - Supply-side measures crucial - Strategic reserves needed - Import substitution priority - Agricultural productivity focus
Trade Deficit
10% GDP
Current Account
-5% GDP
Export/Import Ratio
50%
Export Performance & Strategy
Export Composition: - π¦ Textiles: 60% of total exports - πΎ Agriculture: 20% (rice, fruits) - π Manufacturing: 15% (sports goods, surgical) - π» IT Services: 5% (growing rapidly)
Competitiveness Challenges: 1. Energy Costs: 30% higher than competitors 2. Logistics: Poor ranking in LPI 3. Technology: Low value addition 4. Market Access: Limited FTAs
Strategic Priorities:
π― Short-term (1-2 years) - Energy subsidy for exporters - Streamline refund mechanisms - Market diversification
π Medium-term (3-5 years) - Technology upgradation - Skills development - Value chain integration
π Long-term (5+ years) - Move up value chain - Services export growth - Regional integration
Fiscal Structure Analysis
Revenue Performance (% GDP): - Tax Revenue: 10.5% - Non-tax Revenue: 2.7% - Total: 13.2% (β 0.5% YoY)
Expenditure Breakdown (% GDP): - Current: 18.0% - Development: 3.5% - Debt Servicing: 7.6% - Total: 29.1%
Key Fiscal Challenges: 1. Narrow tax base (1.5M filers) 2. High debt servicing burden 3. Energy sector losses 4. Low development spending
Reform Priorities: - π― Broaden tax base - π‘ Energy sector reforms - π Expenditure efficiency - ποΈ Increase PSDP allocation
Fiscal Space & Sustainability
Debt Sustainability Indicators:
| Metric | Current | Threshold | Status |
|---|---|---|---|
| Debt/GDP | 85.2% | 60% | π΄ High |
| Interest/Revenue | 45% | 30% | π΄ Critical |
| Primary Balance | -1.2% | +1.0% | π‘ Improving |
| Debt Service/Exports | 28% | 20% | π΄ High |
Creating Fiscal Space:
- Revenue Enhancement
- Digital tax system rollout
- Property tax reforms
- GST harmonization
- Expenditure Rationalization
- Targeted subsidies
- Public sector efficiency
- Pension reforms
- Debt Management
- Re-profiling external debt
- Domestic debt optimization
- Concessional financing
Medium-term Target: Reduce debt-to-GDP to 70% by 2028
Comprehensive Policy Recommendations
I. Immediate Actions (0-6 months)
π― Stabilization Measures - Maintain inflation targeting framework - Address circular debt in energy sector - Fast-track pending export refunds - Strengthen social safety nets
II. Short-term Reforms (6-18 months)
π Growth Enhancement - SME credit guarantee scheme - Export diversification incentives - Agricultural productivity program - Digital economy promotion
π° Fiscal Consolidation - Broaden tax base to 3M filers - Rationalize energy subsidies - Improve tax administration - Control current expenditures
III. Medium-term Structural Reforms (2-5 years)
π Competitiveness Agenda - Special Economic Zones operationalization - Skills development aligned with industry - Infrastructure modernization - Regional trade integration
ποΈ Institutional Strengthening - Civil service reforms - Regulatory improvements - Provincial fiscal capacity - Data and statistics enhancement
IV. Long-term Transformation (5+ years)
π Economic Transformation - Knowledge economy transition - Green growth strategy - Demographic dividend capture - Global value chain integration
Policy Impact Assessment
Reform Areas by Impact & Feasibility:
Key Insights: - Energy reforms: Highest impact but challenging - Digital initiatives: Easy wins with good returns - Tax reforms: Critical but politically difficult - Social protection: Immediate need & feasible
Success Factors: β Political commitment β Implementation capacity β Stakeholder buy-in β Monitoring framework
Pakistan Economic Observatory
Purpose: This dashboard provides real-time monitoring and analysis of Pakistanβs economic indicators to support evidence-based policy making and public understanding of economic trends.
Features: - π Interactive visualizations using Plotly - π Automated data updates from World Bank - π Trend analysis and forecasting - π Regional comparisons - π Policy recommendations
Technical Stack: - Platform: Quarto Dashboard - Language: R - Data Sources: World Development Indicators (WDI) - Visualization: ggplot2, plotly - Forecasting: forecast package
Updates: - Data refreshed monthly - Analysis updated quarterly - Special reports for major events
Data Availability Note: Some World Bank indicators may not be available or may have different codes across time periods. The dashboard uses fallback sample data where necessary and clearly indicates when real WDI data is not available.
Disclaimer: Views expressed are those of the author and do not necessarily reflect official positions of QAU or any other institution.
Professor Zahid Asghar
Academic Profile: - Professor of Economics - School of Economics, Quaid-i-Azam University - Research interests: Macroeconomics, Development, Applied AI
Contact Information: - π§ Email: zahid@qau.edu.pk - π¦ Twitter: @zahedasghar - πΌ LinkedIn: /in/zahedasghar - π GitHub: /zahedasghar
Related Resources: - QAU Economics Department - Pakistan Economic Survey - State Bank of Pakistan - PBS Statistics
Collaboration: Open to research collaborations, data sharing, and policy consultations. Please reach out for: - Custom economic analysis - Training workshops on R/Quarto - Research partnerships - Data requests
Citation: Asghar, Z. (2024). Pakistan Economic Observatory. Quaid-i-Azam University. Available at: [URL]
Troubleshooting: If you encounter data loading issues, try: 1. Clearing the cache files (pak_econ_data_*.rds) 2. Checking your internet connection for WDI access 3. Using the alternative data sources mentioned
Regional Development Gaps
Provincial Poverty Rates: - Punjab: 31.4% - Sindh: 35.7% - KPK: 40.2% - Balochistan: 62.3%
Urban-Rural Divide: - Urban Poverty: 18.2% - Rural Poverty: 43.7% - Gap: 25.5 percentage points
Key Disparities: 1. Education: Rural literacy 35% lower 2. Health: Infant mortality 2x in rural areas 3. Infrastructure: 40% rural areas lack roads 4. Employment: Urban unemployment lower
Policy Interventions: - Ehsaas Program: 12M beneficiaries - BISP: PKR 400B annual allocation - Skills programs targeting youth - Rural development initiatives
Sustainable Development Goals Progress
SDG Performance (2024):
Critical Interventions Needed: 1. Scale up social protection 2. Invest in human capital 3. Address gender gaps 4. Climate adaptation focus