In some misguided attempt at glossing over grim realities, the Pakistan Economic Survey 2024-25 report features the word ‘resilience’ multiple times when describing the performance of several major sectors.

The unfortunate truth is quickly revealed upon a closer look at the apparent distress the country has had to pull through over the past year, with major crops declining by 13.5 per cent, GDP reaching only 2.68pc — well below its intended target of 3.56pc — and a 1.5pc contraction in large-scale manufacturing (LSM). Resilient indeed.

Beginning with agriculture, though the overall sectors posited a 0.56pc increase in growth, this was largely due to a 4.72pc growth in the livestock sector, which amounts to 63.6pc of agriculture. Meanwhile, major crops including wheat, rice, sugarcane, maize, and cotton were hard hit by a medley of troubles, especially water shortages, that dissuaded farmers from tackling water-intensive crops like rice.

Moreover, agricultural inputs on the whole proved to be much too expensive in FY25 — despite their generally poor quality (especially in terms of pesticides and seeds) and global reduction in input costs — further straining farmer incomes as prices of fertilisers, pesticides, seeds, and tractors doubled over the past three years. The uptick in other subsectors, including livestock, fisheries and forestry, was unfortunately unable to tilt the sector into any meaningful growth direction beyond a measly 0.56pc increase.

The missed tax and GDP goals draw confusion and questions to the FY26 fiscal aspiration of a 3.9pc growth in GDP and nearly Rs14tr in taxes

Similarly, while the manufacturing sector recorded moderate growth of 1.3pc, compared to 3pc in FY24, crucial sectors including LSM and subsector mining and quarrying (down by 3.4pc) suffered losses. The survey explains the negative growth as a result of “persistent structural bottlenecks, elevated input costs, and contractions in key sectors, including food, chemicals, iron and steel, and electrical equipment” as major hindrances to LSM.

This isn’t the first we’re hearing of “persistent” issues in the sector; only a couple of months ago, the Ministry of Finance admitted that “recovery remained elusive” in LSM in its April Monthly Economic Update and Outlook, stating that the sector remained under pressure with declining month-on-month and year-on-year output. The 1.5pc contraction, therefore, comes as no great surprise, unfortunately.

On a more optimistic note, the country was able to enjoy a current account surplus of $1.9 billion during July–April FY25. The external account was largely bolstered by remittances, that reached a new high of $31.2bn, a 31pc increase from a year prior. Though something of a big win, analysts have taken a cautionary stance, highlighting the dangers of extreme remittance dependence over a more healthy, export-focused balance-of-payments stability. At the end of the day, it is crucial for the centre to generate substantial wealth via value-added goods exports as opposed to relying on the seasonally volatile good nature of its overseas citizens.

Speaking of generating wealth, another area of concern for the government is the state of its tax collection. As per the survey, the centre was able to muster Rs9.14tr, significantly lower than its revised Rs12.3tr goal. Though several trillion rupees short, tax revenue did increase over last year’s Rs7.3tr by 25.8pc. However, the survey fails to mention any change in the overall tax net. This may largely be because, alarmingly, there was no change, pointing at the overwhelming tax burden a small section of society has been struggling with for years.

According to the 2024-25 statistics, out of around 120m adult individuals, only 5.8m are active tax filers, representing less than 5pc of the adult population. Attempts to address collection efforts with creative new avenues, like the 15pc incremental tax debacle on banks’ Advance-to-Deposit ratios around November 2024, proved fruitless.

There are some optimistic highlights in the survey, though. Chief among them is the record low inflation rate of 0.3pc year-on-year in April 2025. Analysts prescribe this slowdown to low prices of staple food items in domestic markets compared to the global arena. After three years of elevated inflation levels, this is the first time in a long while that Pakistan has experienced single-digit inflation.

Though the downward trend continues, it must be addressed that the rate merely points to a slowdown of inflation and not deflation, or a drop in overall price levels. The average inflation over the past 51 months stands at 83pc, the Pakistan Bureau of Statistics noted, so the cost of living is still rather high.

That said, FY25 was a year of monetary easing thanks to the mostly sustained inflation moderation and a largely stable currency. The State Bank was able to bring down the policy rate from 22pc in FY24 to the present 11pc, supported by easing global energy prices and declining domestic food prices.

All in all, the 2.68pc GDP growth, paired with troubled crop and LSM sectors, paints a rather gloomy picture of the outgoing year. The missed tax and GDP goals draw confusion and questions to the FY26 fiscal aspiration of a 3.9pc growth in GDP, nearly Rs14tr in taxes, especially with a substantially higher defence budget having risen by 18pc.

Published in Dawn, The Business and Finance Weekly, June 16th, 2025