- Deep reforms to address human capital, agriculture, energy inefficiencies, poverty reduction and improved living standards urged
Pakistan’s economy in 2024 grew at a slow pace of 1.8% due to tight monetary and fiscal policies, import management measures, and muted economic activity amid weak confidence. The country faced significant challenges, including a large debt burden, limited foreign exchange reserves, and high poverty rates, with 40% of the population living below the poverty line.
To address these issues, experts recommended implementing deep, sustained reforms, including addressing the human capital crisis, generating more fiscal space, and striving for a more dynamic and open economy. The agriculture sector also needed transformation to ensure food security, and energy sector inefficiencies had to be addressed to reduce losses and attract investment. Overall, experts suggested a comprehensive turnaround strategy to achieve robust growth, reduce poverty, and improve living standards in Pakistan.
Pakistan’s economy in 2025 is expected to confront significant challenges, primarily driven by its precarious fiscal situation. The country’s debt-to-GDP ratio will remain alarmingly high, with estimates suggesting it will surpass 90%. This will not only limit the government’s ability to invest in vital sectors such as education, healthcare, and infrastructure but also increase the risk of debt distress.
Moreover, the burden of debt servicing will continue to weigh heavily on the economy, diverting resources away from essential public expenditures. Another major challenge confronting Pakistan’s economy in 2025 will be its struggling external sector. The country’s trade deficit will remain substantial, driven by a decline in exports and a surge in imports. This, coupled with dwindling foreign exchange reserves, will leave Pakistan vulnerable to external shocks and raise concerns about its ability to meet international payment obligations.
Furthermore, the rupee’s depreciation against major currencies will erode the purchasing power of citizens, fuelling inflationary pressures and reducing the competitiveness of Pakistani exports. The energy crisis will also pose a significant challenge to Pakistan’s economy in 2025. The country’s energy sector will be marred by inefficiencies, transmission losses, and a heavy reliance on imported fuels. This will result in frequent power outages, crippling industrial production and undermining economic growth. Moreover, the circular debt in the energy sector will continue to balloon, threatening the financial viability of power distribution companies and exacerbating the overall economic instability. Addressing these challenges will be crucial for Pakistan to achieve sustainable economic growth and development in 2025.
But as scholar said, in every challenge, there is an opportunity for growth, learning, and innovation. Pakistan’s economy in 2025 will witness significant opportunities for growth and development, driven by its strategic location and young population. The country will leverage its geographic position to become a hub for regional trade and commerce, capitalizing on the China-Pakistan Economic Corridor (CPEC) and other regional connectivity initiatives. This will attract foreign investment, boost exports, and create new job opportunities, driving economic growth and prosperity. The technology sector will also emerge as a key driver of Pakistan’s economy in 2025.
The country will witness a surge in technology adoption, driven by the growing demand for digital services and the increasing availability of high-speed internet. This will create new opportunities for tech startups, e-commerce platforms, and digital payment systems, driving innovation and entrepreneurship. Moreover, the technology sector will also create new job opportunities, both directly and indirectly, contributing to the country’s economic growth and development.
Pakistan’s economy in 2025 will also hopefully benefited from the growing focus on sustainable development and renewable energy. The country will invest heavily in renewable energy sources, such as solar and wind power, to reduce its reliance on fossil fuels and mitigate the impact of climate change. This will create new opportunities for green technologies, sustainable infrastructure, and eco-tourism, driving economic growth and environmental sustainability. Moreover, Pakistan’s commitment to sustainable development will also enhance its global reputation and attract foreign investment, contributing to the country’s economic prosperity. Pakistan’s economy in 2025 will also benefit from the growing trend of entrepreneurship and innovation. The country will witness a surge in startup activity, driven by the increasing availability of venture capital, incubation centers, and mentorship programs. This will lead to the creation of new industries, jobs, and opportunities, driving economic growth and diversification. Moreover, Pakistan’s entrepreneurs will play a key role in developing innovative solutions to the country’s pressing challenges, such as energy shortages, water scarcity, and food insecurity.
The tourism sector will also expected to emerge as a significant contributor to Pakistan’s economy in 2025. The country will invest heavily in developing its tourism infrastructure, including hotels, resorts, and transportation networks. This will enable Pakistan to capitalize on its rich cultural heritage, natural beauty, and historical landmarks, attracting millions of tourists from around the world. The growth of tourism will not only generate significant revenue for the economy but also create new job opportunities, stimulate local economies, and promote cultural exchange and understanding. In addition, Pakistan’s strategic location along the Arabian Sea will present a significant opportunity for the country to tap into the vast potential of the Blue Economy in 2025. With the China-Pakistan Economic Corridor (CPEC) and the Gwadar Port set to become a major hub for regional trade and commerce, Pakistan will be well-positioned to capitalize on the growing demand for seafood, shipping, and tourism.
The country’s 1,046 km coastline and exclusive economic zone (EEZ) of over 290,000 square kilometers will provide a vast canvas for the development of fisheries, aquaculture, offshore oil and gas exploration, and renewable energy projects, generating significant revenue, creating jobs, and driving economic growth.
In conclusion, Pakistan’s economy has faced significant challenges in 2024, with slow growth, high debt, and limited foreign exchange reserves. However, despite these challenges, the country has the potential to witness significant growth and development in 2025, driven by its strategic location, young population, and growing focus on sustainable development and renewable energy.
To achieve sustainable economic growth and development, Pakistan must address its pressing challenges, including its precarious fiscal situation, struggling external sector, and energy crisis. Implementing deep, sustained reforms, including addressing the human capital crisis, generating more fiscal space, and striving for a more dynamic and open economy, will be crucial. Additionally, leveraging its geographic position to become a hub for regional trade and commerce, capitalizing on the China-Pakistan Economic Corridor (CPEC) and other regional connectivity initiatives, and investing in renewable energy sources, will be essential for driving economic growth and prosperity.
The author is MD IRP/ Faculty Department of H&SS, Bahria University Karachi