The year 2025 has unfolded as a rare inflection point for Pakistan — a moment when the country’s long-running narrative of economic distress finally began to give way to one of cautious, fact-based confidence. Between January and October, the national mood shifted perceptibly. The despair that dominated the past two years has softened, replaced by a sense that the country may, at last, be steering itself toward stability rather than stumbling from one emergency to the next.
This improvement didn’t emerge from a single bold stroke; rather, it is the product of policy discipline that Pakistan has often struggled to maintain. The revival of an IMF-supported reform program, greater coherence in economic decision-making, and a renewed commitment to stabilization have collectively restored a measure of credibility. While no one suggests the hard work is over, it is equally clear that the foundations of recovery are firmer today than they have been in a decade.
Nothing illustrates this more vividly than the taming of inflation. After suffocating households and eroding business confidence in 2023, inflation eased sharply through 2024 and early 2025, touching a ten-year low of 0.3 percent in April. This was no statistical quirk but the result of difficult policy tightening by the State Bank of Pakistan, followed by a deliberate and timely relaxation once inflation expectations stabilized. For businesses and consumers alike, this brought welcome clarity: purchasing power improved, planning horizons lengthened, and sentiment recovered from years of volatility.
Fiscal discipline complemented monetary restraint. The government’s delivery of a primary surplus nearing 3 percent of GDP marks a notable improvement from last year and reflects tighter spending controls, better prioritization of development spending, and early gains from digitized tax administration. Pakistan’s fiscal vulnerabilities remain significant — the tax base is narrow, and institutional bottlenecks linger — but the direction is more reassuring than it has been for years.
The external account, long the Achilles’ heel of the economy, has also undergone a meaningful shift. A current-account surplus of nearly US$2 billion by October, a rise in reserves to US$16.6 billion, and steadier remittance inflows have collectively narrowed vulnerabilities that once threatened to spiral out of control. Import rationalization — done with more nuance this time — helped protect industry while curbing excesses. Meanwhile, the rise of non-traditional exports, especially IT and food processing, signals the beginnings of structural diversification that Pakistan has long aspired to but rarely achieved.
These improvements have translated into something Pakistan badly needed: reinvigorated investor confidence. The Pakistan Stock Exchange regained momentum, sovereign risk spreads narrowed, and foreign portfolio investors — once deeply wary — began re-entering the market. The rupee’s stability through most of the year, in contrast to the turbulent swings seen previously, further reinforced the perception that policymakers had regained control of the economic wheel.
Looking ahead, 2026 carries a sense of promise — cautious, yet credible. Growth projections above 3 percent, a sustained low-inflation environment, and a slightly more comfortable fiscal position create room for the type of reforms Pakistan has repeatedly postponed: energy market restructuring, deeper digitization, export expansion, and meaningful improvements in governance. The continued engagement of the IMF, alongside renewed interest from Gulf and Chinese investors, provides additional support.
But the real test of Pakistan’s economic management lies not in celebrating stabilization, but in sustaining it. The country still faces rigid structural impediments — low productivity, inadequate fiscal space, and climate vulnerabilities that increasingly shape economic outcomes. Stability, welcome as it is, must not become an excuse for complacency. If anything, it should embolden policymakers to pursue reforms that were simply not possible during years of crisis.
We present this Annual Issue with a sense of sober optimism. The road ahead remains difficult, but for the first time in many years, it leads upward.
ALI HAIDER GOKAL
EDITOR