Strong growth in remittances not only offset the widening trade deficit but also generated a significant current account surplus, the State Bank of Pakistan (SBP) said on Thursday. It added that cautious monetary policy and continued fiscal consolidation measures strengthened economic stability during FY2024-25. Moreover, favorable global commodity prices and the IMF’s Extended Fund Facility (EFF) program supported an overall improvement in macroeconomic conditions.
On Thursday, the SBP released its Annual Report on the State of Pakistan’s Economy for FY2024-25. According to the report, real GDP growth recorded a modest increase, mainly driven by a recovery in the services sector and industrial activity, despite a decline in major crop output and contraction in large-scale manufacturing (LSM). This economic expansion was accompanied by higher import volumes.
On the other hand, a decline in global food prices, an uncertain international trade environment, and geopolitical tensions collectively constrained export growth during the fiscal year.
However, a sharp rise in remittances more than offset the trade deficit, resulting in a significant current account surplus. According to the report, this surplus, along with higher external financial inflows from multilateral and bilateral lenders, stabilized the foreign exchange market and boosted SBP’s reserves.
The report further noted that sustained fiscal consolidation efforts by the government and a sharp rise in SBP’s profits brought the fiscal deficit to a nine-year low, while the primary balance remained in surplus for the second consecutive year, exceeding budget estimates.
