Islamabad, Pakistan – Pakistan’s economy demonstrated continued growth momentum in May 2025, marked by strengthening macroeconomic fundamentals, reduced inflation, and an improved external sector. The provisional real GDP growth for FY2025 is recorded at 2.68 percent.
Inflation continued its downward trend, with year-on-year (YoY) CPI inflation at 3.5 percent in May 2025, a notable decrease from 11.8 percent in May 2024. Month-on-month (MoM) inflation also declined by 0.2 percent. The State Bank of Pakistan’s Monetary Policy Committee (MPC), in its meeting on June 16, 2025, opted to keep the policy rate at 11 percent, anticipating inflation to remain within the 5.0 to 7.0 percent range in FY2026.
The external account saw significant improvement, recording a surplus of $1.81 billion during Jul-May FY2025, a reversal from a deficit of $1.6 billion in the same period last year. This was largely driven by a substantial 28.8 percent increase in remittances, reaching $34.9 billion. Exports of goods rose by 4.0 percent to $29.7 billion, with notable gains in knitwear, garments, and bedwear. Imports also increased by 11.5 percent to $54.1 billion, widening the trade deficit to $24.4 billion. As of June 13, 2025, foreign exchange reserves stood at $17.0 billion.
Fiscal consolidation efforts have reinforced fiscal discipline, with net federal receipts growing by 44.4 percent to Rs 8,124.2 billion during Jul-Apr FY2025. This growth was primarily fueled by a 68.1 percent increase in non-tax collections and a 25.9 percent increase in tax collections during Jul-May FY2025. Total expenditure increased by 18.5 percent, driven by a 40.6 percent rise in Public Sector Development Program (PSDP) expenditure. Consequently, the fiscal deficit decreased to 3.2 percent of GDP in Jul-Apr FY2025 from 4.5 percent last year, and the primary surplus reached 3.2 percent of GDP.
The Large Scale Manufacturing (LSM) sector showed a mixed performance in April 2025, with a year-on-year growth of 2.3 percent but a month-on-month contraction of 3.2 percent. Cumulatively, LSM declined by 1.5 percent during Jul-Apr FY2025. However, some sectors like textiles, wearing apparel, coke & petroleum products, beverages, and pharmaceuticals witnessed positive growth. The automobile sector also recorded strong growth in Jul-May FY2025, with significant increases in the production of cars (39.2%), trucks & buses (94.8%), and jeeps & pick-ups (74.7%). Cement dispatches grew by 2.5 percent, primarily due to a 25.7 percent rise in exports.
Agricultural output is expected to receive a boost from the availability of quality seeds and mechanization. Agricultural credit disbursement increased by 15.7 percent to Rs 2,066.6 billion during Jul-Apr FY2025. Imports of agricultural machinery also rose by 10.0 percent, indicating increasing mechanization.
The Pakistan Stock Exchange (PSX) performed well in May 2025, with the KSE-100 index gaining 8,365 points to close at 119,691 points. Market capitalization increased by Rs 982 billion, reaching Rs 14,503 billion.
Global economic growth is projected at 2.3 percent in 2025, according to the Global Economic Prospects (GEP) June 2025 report. Global inflation is expected to grow by 2.9 percent in both 2025 and 2026. The FAO Food Price Index (FFPI) in May 2025 averaged 127.7 points, a slight decrease from April but still 6.0 percent higher than the previous year. The export outlook for Pakistan remains positive, as Composite Leading Indicators (CLIs) of key trading partners are performing above their long-term averages.
