Pakistan’s economic managers are celebrating what they call a turnaround—GDP growth picking up, foreign reserves stabilizing, and a reduced current account deficit. The government, backed by official figures and endorsements from international financial institutions, insists that the economy is on an upward trajectory. But for millions of Pakistanis struggling with rising food prices, declining purchasing power, and stagnant wages, these claims ring hollow.
So, why does economic optimism at the top not translate into real relief for the masses? A deep dive into the numbers reveals a complex picture—one where macroeconomic stabilization exists alongside worsening living conditions for ordinary citizens. Pakistan’s government and finance ministry officials point to key economic indicators showing improvement by highlighting GDP Growth.
Officials claim the economy has shown a rebound, with the GDP expected to grow by 2.3% in FY 2024, compared to a contraction of -0.2% in FY 2023. They are touting that Pakistan’s foreign exchange reserves have climbed to $8.5 billion (as of early 2025), compared to a dangerously low $3.5 billion in mid-2023. More intriguingly, the political and bureaucratic partners are making the ‘free media in Pakistan’ project that the current account deficit has shrunk to 0.8% of GDP, down from 4.5% in 2022, mainly due to reduced imports and inflows from remittances. What makes their claims credible is the unprecedented boom in the country’s stock market where the KSE-100 index has surged past 113,000 points, nearly doubling from its levels in early 2023.
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Finance ministry officials are crediting two key elements for this recovery, in complete sync with the country’s establishment, and that is the IMF bailout and fiscal discipline shown by the current government of Prime Minister Shahbaz Sharif. It is also substantiated by showcasing the 3-billion-dollar IMF stand-by agreement in 2023 which undoubtedly helped stabilize Pakistan’s economy, enforcing tight fiscal policies and reducing external vulnerabilities. These figures, without any iota of doubt, suggest a country moving away from the brink of economic collapse. However, as one of the senior officials working at the manufacturing site of these figures, while scampering through these numbers said: “Economic statistics are like a bikini—what they reveal is suggestive, but what they conceal is vital.” An often quoted verbatim of an American Professor of Business, Aaron Levenstein, who was known for his insightful and often humorous observations on statistics and business practices. Diving into these ‘suggestive’ and ‘concealing’ statistics examination shows why common Pakistanis are not experiencing the benefits of this much-trumpeted recovery.
The recent visit of IMF officials in early 2025 has further reinforced this narrative. Their assessment mission reviewed Pakistan’s economic recovery post-bailout and expressed cautious optimism, citing improvements in fiscal management and external stability. However, the IMF also emphasized the need for continued reforms, especially in broadening the tax base and addressing energy sector inefficiencies. The IMF team’s visit wasn’t just a routine check-in—it was a critical evaluation of whether Pakistan could qualify for a new, extended loan program expected to be discussed in mid-2025. Future visits by IMF officials are planned in the coming months to monitor Pakistan’s adherence to fiscal targets and to negotiate terms for long-term financial stability.
Yet, a crucial question remains—do the concerns of the common man ever echo in IMF boardrooms? Historically, IMF programs focus on macroeconomic stability, often sidelining the socioeconomic impacts on ordinary citizens. Critics argue that while IMF metrics prioritize fiscal discipline and reserve accumulation, they seldom account for rising living costs, wage stagnation, or social welfare erosion. This disconnect is palpable in Pakistan, where economic policies crafted to meet IMF benchmarks have increased the burden on the middle and lower classes.
While GDP growth is picking up, inflation remains stubbornly high at 22% (January 2025), after peaking at 38% in mid-2023. Resultantly, the essential commodities are still unaffordable. Wheat flour prices-a key component of every household- has doubled in the last two years, reaching Rs 3,500 per 20 kg bag. Electricity tariffs have soared by 50% since 2022 due to IMF-mandated subsidy cuts, with consumers now paying up to Rs 55 per unit, especially when irrelevant taxes (like surcharges, advanced taxes, fees, etc.) dumped into the electricity bills are added to the officially quoted 24 per unit cost of the electricity. Petrol prices hover around Rs 260 per litre, compared to Rs 160 in early 2022.
Despite an unprecedented and ‘revealing’ boom in the country’s stock market, the real economy remains sluggish. The manufacturing sector has shrunk due to high interest rates (currently 12%, reversed recently from 22% the highest in Pakistan’s history), making credit too expensive for businesses. Over 1.2 million jobs were lost in the textile sector alone in 2023, as many factories shut down due to expensive electricity and gas shortages. Small and medium enterprises, commonly known as SMEs, which employ nearly 80% of Pakistan’s workforce, are struggling, with 40% reporting business contractions in 2024. Despite a 2.3% GDP growth projection, population growth remains at 2.5%, meaning per capita income is shrinking.
The rupee has been kept stabilized at around Rs 278 per USD, compared to its worst point of Rs 320 per USD in 2023. However, this stability came at the cost of import restrictions, stifling industrial activity and increasing reliance on expensive smuggling routes. On the flip side, this has also resulted in a whopping drop of 50% in car sales in 2023 as auto manufacturers struggled with import restrictions on parts. Medicine shortages persisted, with pharmaceutical companies warning of closures due to rising raw material costs, while consumer goods imports remained suppressed, keeping prices artificially high and with quality control or price control mechanisms only operational in books, the consumers continue to get locally manufactured consumables at the same or 50% more which they used to pay for imported consumables in 2022.
The much-trumpeted IMF loan certainly helped prevent default, but its conditionalities enforced by the current government in the name of ‘strict fiscal discipline’ have squeezed the middle and lower classes. By slashing the energy and gas subsidies to meet IMF targets, the government managed to transfer the burden to ordinary citizens. To help meet the IMF requirements of increasing tax revenues, the government imposed additional taxes worth Rs 500 billion in the latest budget, impacting salaried individuals and small businesses. While implementing ‘financial discipline’ asked by the IMF, the public sector development projects have been cut by 30%, limiting infrastructure expansion and job creation. A senior official at the Finance Ministry aptly summarised this by saying that the IMF’s success metric is stability, not affordability for citizens. The current economic model appears to be prioritizing balance sheets over household budgets.
This brings us to the ‘million dollars’ question despite all the blowing trumpets, why the ordinary man is not celebrating this ‘turnaround’ of the economy? Here are a few of the reasons cited by the key policymakers. They believe that GDP expansion does not necessarily translate into higher incomes or job creation. Pakistan’s growth is being driven by external factors (IMF bailout, remittances), not domestic productivity or industrial revival. While commending the booming stock market, they argue that it benefits less than 1% of the population—not the daily wage labourer or salaried worker. Similarly, while acknowledging the reigning in of inflation, they maintain that even as inflation cools down from record highs, real wages have not adjusted, keeping purchasing power low. What makes it worse is the additional tax deductions from the salaried class. The biggest elephant in the room, when it comes to consumption of over 50% of Pakistan’s budget is debt servicing spent on debt repayments, leaving little room for social welfare spending.
In light of this, the government faces a tough balancing act of reducing inflation without stifling economic activity further. Reviving industrial output by easing credit conditions while maintaining fiscal discipline. Expanding social safety nets to cushion lower-income groups from economic shocks. Negotiating a long-term IMF agreement that allows for economic breathing room instead of perpetual austerity. Without structural reforms and investment in productivity, Pakistan’s economy may stabilize on paper, but for the average citizen, the struggle for affordability will persist. The true test of economic success is not in foreign reserves or stock indices but in the affordability of roti, bijli, aur petrol flour, electricity and petrol)—and so far, that reality remains elusive. As John Kenneth Galbraith once said, “The only function of economic forecasting is to make astrology look respectable.” The numbers may show recovery, but for millions of Pakistanis, it still feels like survival
