Lahore – Pakistan’s economy is projected to grow by only 2.44 percent in the upcoming fiscal year 2024-25, reflecting a continued period of economic stagnation. While this figure marks a slight improvement over the 1.7 percent growth rate recorded in the previous fiscal year, it remains well below the threshold needed to meet the country’s development needs, address unemployment, and alleviate poverty.
This projection was presented in a detailed economic outlook report published by the Modeling Lab of the Lahore School of Economics (LSE). The findings underscore growing concerns about weak industrial output, agricultural decline, and inconsistent policy decisions, all of which have collectively hindered Pakistan’s capacity to achieve robust and sustainable economic growth.
Economic Forecasts Mirror International Concerns
According to the LSE report, the projected GDP growth aligns with similar forecasts from international institutions such as the International Monetary Fund (IMF), World Bank, and Asian Development Bank (ADB). These institutions estimate Pakistan’s economic growth for FY 2024-25 to be in the range of 2.5 to 2.7 percent.
While this slight upward trajectory compared to last year’s 1.7 percent growth may appear positive at first glance, economists caution against premature optimism. Pakistan’s economic base remains fragile, and several key sectors are showing signs of systemic distress that need urgent policy intervention.
Industrial Sector in Decline: Large-Scale Manufacturing Drops by 1.9%
A key reason behind the sluggish growth projection is the ongoing downturn in the Large-Scale Manufacturing (LSM) sector, which has seen a 1.9 percent decline in output during the current fiscal year. This continues the downward trend that has plagued the sector over the past two years.
The decline in industrial production reflects deeper issues such as energy shortages, rising production costs, supply chain disruptions, and a lack of investor confidence. Major industries such as textiles, cement, and automobiles have either slashed production or halted operations altogether, further weakening the country’s export potential.
Agricultural Sector Suffers Severe Setbacks
The LSE report also points to significant underperformance in Pakistan’s agricultural sector, which has long been considered the backbone of the national economy. The production of major crops has declined sharply, exacerbating the crisis facing rural communities and food security nationwide.
The report provides the following statistics:
- Wheat production declined by 9 percent, dropping to 29 million tonnes.
- Maize witnessed a 15 percent decline.
- Sugarcane production fell by 4 percent.
- Rice dropped by 1.4 percent.
- Cotton production suffered the most, with a staggering 31 percent decline.
Government Policy Blamed for Agricultural Decline
Agricultural experts and analysts argue that these declines are not primarily the result of unfavorable weather, but rather due to policy missteps and lack of farmer-friendly initiatives.
A major concern is the abolition of government support prices, which previously offered minimum price guarantees to farmers for key crops. Without this financial safety net, many farmers have found crop cultivation economically unviable, leading to reduced acreage, lower production, and increased indebtedness.
The report criticizes the Pakistan Bureau of Statistics (PBS) for its methodology, which focuses on quantity-based crop estimates, ignoring the financial realities farmers face due to price collapses in agricultural markets.
For instance, a drop of Rs 1,000 per 40 kilograms in wheat prices has translated into a 25 percent loss in farmer income, further intensifying rural distress and reducing the incentive for agricultural production.
Inflation Expected to Rise: Threat to Purchasing Power
Another serious concern outlined in the report is the projected inflation rate of 8.37 percent for the fiscal year 2024-25. This figure is higher than the government’s target of 7.5 percent and well above the IMF’s forecast of 5.1 percent.
Persistent inflation is not only eroding purchasing power but also increasing production costs for both agricultural and industrial sectors. Policymakers have struggled to strike the right balance between monetary tightening to curb inflation and stimulus spending to spur growth.
Economists warn that if inflation control measures continue to disrupt the agricultural economy, it could have a cascading effect on food prices, employment, and poverty levels.
Policy Framework Urgently Needs Overhaul
The LSE report emphasizes that Pakistan’s current economic difficulties are not cyclical but structural. A short-term recovery cannot address the long-term issues of:
- Low productivity across major sectors,
- Ineffective subsidy and tax regimes,
- Neglected public infrastructure, and
- Insufficient foreign and domestic investment.
To overcome these challenges, the report suggests that Pakistan adopt an investment-led development model focused on long-term structural reforms rather than short-term fiscal adjustments.
Growth and Trade Deficits: A Delicate Balance
Historically, whenever Pakistan’s GDP growth crosses the 5 percent mark, it triggers a spike in imports, widening the current account deficit and placing pressure on foreign exchange reserves. The country’s weak export base and reliance on imported energy and machinery have long contributed to macro-economic imbalances.
Therefore, even modest growth must be carefully managed to avoid triggering external sector crises.
Industrial and Agricultural Revival Key to Stability
The report concludes that without simultaneous policy support for both industrial and agricultural sectors, sustainable economic recovery is unlikely. Current fiscal and monetary policies are failing to create an enabling environment for growth, investment, and job creation.
Pakistan’s future economic stability will depend heavily on:
- Enhancing value-added production,
- Ensuring food security through modern farming methods,
- Reducing import dependency, and
- Promoting export diversification.
Recommendations: Path Toward Inclusive Economic Growth
To address the ongoing crisis and revive the economy, the report recommends the following:
- Reinstating support prices and providing input subsidies to farmers.
- Reforming the industrial sector with targeted incentives and reliable energy supply.
- Encouraging public-private partnerships to boost infrastructure development.
- Attracting foreign direct investment (FDI) by ensuring political and economic stability.
- Improving data accuracy in government agencies like PBS to better reflect economic realities.
- Restructuring debt management to reduce fiscal pressure and increase development spending.
Conclusion: A Critical Juncture for Pakistan’s Economy
Pakistan stands at a critical economic crossroads. The forecast of 2.44 percent growth for the next fiscal year is not just a number—it is a reflection of deeper structural weaknesses that must be addressed with bold and comprehensive reforms.
Without urgent and sustained efforts to stabilize agriculture, revive industry, control inflation, and build investor confidence, Pakistan risks falling into a low-growth, high-debt trap that could take years to reverse.
The upcoming fiscal year offers an opportunity for course correction. If policymakers heed the warnings and act decisively, Pakistan can gradually restore economic stability and pave the way toward a more resilient, inclusive, and prosperous future.
