The year 2025 will succeed a year which has witnessed both positive and negative outcomes. The GDP growth rate will remain below two per cent in 2024. Fortunately, there has been an extraordinary decline in the rate of inflation from 28.3pc in January 2024 to only 4.9pc by November 2024.

The balance of payments position has been strengthened by the generation of a current account surplus in the first five months of FY25. However, inflows into the financial account have remained very low, especially from the international private sector. FBR revenues are already showing a big shortfall.

Turning to 2025, the prospects for GDP growth are limited by a lower wheat crop and continued stagnation in industrial production. The inflation rate is likely to remain low in the first half of the year and then rise precipitously due to a strong low-base effect after June 2025.

Perhaps the most critical issue relates to the outcome of the first formal review of the IMF programme in March 2025. There are already clear indications that the projected external financing inflows by the IMF will not be realised.

Furthermore, there is a likelihood that several structural conditions, performance criteria and indicative targets will not be met in March 2025. The risk is that the economy may return to a fragile financial position in the second half of 2025.

Published in Dawn, The Business and Finance Weekly, December 30th, 2024