Is Rapid Electrification Stimulating Pakistan's Economy?
Pakistan's electricity demand has soared 21% in just two years. Rapid electrification is positively impacting all sectors of Pakistan's economy. thanks to growing deployment of distributed solar, estimated at 38 GW as of June, 2025. In 2025, 44% of solar deployment was residential, followed by industry (26%), agriculture (21%) and commercial users (9%). It is stimulating demand for a variety of products ranging from air conditioners and refrigerators to washing machines and electric scooters/motorbikes. As a result, Pakistan’s Large-Scale Manufacturing (LSM) sector grew by 6.5% in the fiscal year, rebounding from a –0.69% contraction the previous year. The fiscal year saw a 61.66% surge in automobile production.
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| Impact of Solar Energy Revolution in Pakistan |
Dave Jones of Ember, a global energy think tank, says Pakistan's experience with distributed solar could become the blueprint for dozens of developing countries. If Pakistan is the first large-scale proof that distributed solar can transform an economy, the implications reach far beyond South Asia. He thinks that this isn't primarily a climate story—it's an economic development story driven by disruptive technology.
Soaring electrification is accelerating sales of electric vehicles and home appliances in Pakistan. Electric vehicle adoption is exploding in the two-wheeler sector due to soaring fuel costs and the new Pakistan Accelerated Vehicle Electrification (PAVE) program. Electric-bike registrations surged by 322% year-on-year with cumulative sales reaching 125,511 units by May, capturing over 10% of the monthly two-wheeler market. In the first half (H1) of 2026, Haier achieved an all-time record by selling 690,000 AC units—surpassing its entire sales volume for the full year of 2025. Haier alone commands over 45% of the total market share in Pakistan. The country's refrigerator market accounts for 56% of its major household appliances sector. Market penetration sits around 51-56%, with unit sales expected to surge 20% to 339,000 units in CY26.
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| Solar Deployment in Different Sectors. Source: Ember |
Mass deployment of solar energy is helping Pakistan's economy become more resilient to external energy shocks, such as the Strait of Hormuz crisis. It is making energy affordable for the ordinary folks. Increased energy availability and security are transforming almost all sectors of the economy, which is not reflected in the official statistics provided by the Pakistan Bureau of Statistics.
Related Links:
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Pakistan's Electricity Consumption Up 21% in Just Two Years
Pakistan's New Infrastructure Investments and Trade Routes
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Pakistan at 75
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Riaz Haq's Youtube Channel
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Pakistan's electricity generation mix has rapidly shifted toward renewable energy, driven by a massive distributed solar boom. As of recent 2025–2026 data, grid-connected and behind-the-meter solar accounts for roughly 25-28% of the country's generation. Overall, low-carbon and zero-emission sources now make up over 55% of Pakistan's total generated electricity. [1, 2, 3]
https://ember-energy.org/latest-insights/the-solarisation-of-pakistans-energy-economy/
The breakdown of Pakistan's electricity generation includes the following sources:
Solar & Distributed Renewables: ~25% to 28%
Hydropower: ~24% to 29%
Fossil Fuels (Thermal): ~35% to 40% (comprising a mix of imported coal, domestic coal, natural gas, and furnace oil)
Nuclear Power: ~9% to 11%
Wind: ~3% to 5% [1, 2, 3, 4, 5]
Key Trends:
The Solar Transition: Over the last two years, national electricity demand surged by 21%, with the entirety of this growth met by behind-the-meter residential and commercial solar installations. This explosive growth—totaling an estimated 38 GW of distributed solar capacity—has lowered daytime reliance on the national grid. [1]
Long-Term Goals: Under its clean energy transition plan, Pakistan aims for 58% of its overall electricity generation to stem from renewable sources by 2030. [1]
https://profit.pakistantoday.com.pk/2026/08/03/hbl-pmi-domestic-demand-drives-strongest-manufacturing-expansion-in-four-months
The HBL Pakistan Manufacturing PMI rose to 51.7 in July 2026 from 50.8 in June, marking the strongest improvement in manufacturing conditions in four months. The expansion was driven by a recovery in domestic demand alongside continued resilience in export orders. While manufacturing activity strengthened during the month, the pace of growth remained moderate, highlighting a gradual recovery amid elevated risks stemming from the renewed conflict in the Middle East.
New orders picked up after contracting in June, supported by stronger customer sentiment and competitive pricing. The improvement drove the fastest expansion in manufacturing output in five months and prompted firms to increase purchasing activity and employment for the first time since March. Although export orders continued to underpin overall activity, their relative contribution softened as domestic demand emerged as the primary catalyst for the sector's ongoing recovery. Encouragingly, the improvement in demand was accompanied by easing inflationary pressures, as both input cost and output price inflation moderated despite persistent increases in raw material and fuel costs.
Commenting on the latest PMI data, Humaira Qamar, Head of Equities & Research – HBL, noted “The softer cost environment aligns with our expectation of a gradual disinflationary trend through FY27, although elevated geopolitical risks continue to cloud the near-term outlook. Against this backdrop, the State Bank’s decision to keep the policy rate unchanged at 11.5% strikes an appropriate balance between supporting economic recovery and anchoring inflation expectations. Looking ahead, a sustained improvement in manufacturing activity will depend on policy consistency and a stable external environment that supports both domestic demand and export growth.”
Import Timeline & Milestones
2018–2025 Total: Roughly 7,600,000 MWh (7.6 GWh) of cumulative battery storage imports, with about 60% of that total arriving during 2025 alone. [1]
2024–Early 2025: An estimated 1,250,000 MWh (1.25 GWh) imported in 2024, followed by another 400,000 MWh (0.4 GWh) in the first two months of 2025. [1, 2]
April 2026 Peak: A record single-month high of 652.2 MWh of lithium-ion batteries was imported in April 2026 as consumers and industries shifted heavily toward storage. [1]
Current Import Pace: Ongoing imports are tracking at a rate of more than 5,000,000 MWh (5 GWh) per year. [1]
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Batteries Beat the Grid: Pakistanis Skip Net Metering
https://www.techjuice.pk/batteries-beat-the-grid-pakistanis-skip-net-metering/
Pakistani households are increasingly storing solar-generated electricity in batteries rather than selling it back to the national grid, a shift triggered by the implementation of net metering regulations that has created a new challenge for the government.
According to a report on the Pakistan Battery Import Market, the country has imported batteries with a cumulative capacity of 6.004 GW since January 2024.
April 2026 recorded the highest monthly import volume, with battery capacity reaching 652.2 MW. During that month alone, Pakistani citizens invested Rs126 billion in battery purchases.
Pakistan total power generation capacity, excluding solar, stands at 39,000 MW. Transmission and distribution losses account for up to 18 percent of this total generation capacity.
In response to the rising volume of battery imports, the government has begun drafting a National Battery Framework. Officials note that the growth in solar and battery adoption in Pakistan is outpacing the trend seen in other countries across the region.
Globally, energy storage capacity is projected to reach 1.5 million MW by 2030. Industry estimates suggest global investment in battery storage will total $1.2 trillion between 2024 and 2035.
Recent Wall Street Journal coverage highlights that sodium-based batteries—built using abundant materials like table salt and iron—are emerging as cheaper, safer, and China-free alternatives to traditional lithium-ion batteries for grid storage and electric vehicles.Key Advantages of Sodium BatteriesLower Cost: Made with inexpensive, common ingredients like food-grade table salt, reducing reliance on expensive lithium, cobalt, and copper.Enhanced Safety: Far less prone to thermal runaway fires, and capable of being passively air-cooled rather than needing expensive liquid-chilling systems.Cold Weather Performance: Retain significantly more charge capacity in sub-zero freezing temperatures compared to conventional lithium cells.Industry and Market ShiftsU.S. Startups & Giants: American companies like Peak Energy and Inlyte Energy are racing to scale domestic production for stationary power storage, while General Motors designs its own sodium-based cells.Chinese Production: Major global battery makers like CATL are advancing mass production and deploying sodium-ion technology into both grid systems and smaller city electric vehicles.Market Projections: Analysts project that sodium could capture over a third of global battery production within a decade as supply chains diversify away from lithium.
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China-free batteries made from salt are finally here
While grid battery storage is already growing in the U.S. at a furious pace, new sodium-based batteries are potentially cheaper, longer-lasting, safer and more reliable than conventional, lithium-based ones. They could accelerate the rollout of renewables, and be part of less-polluting alternatives to natural-gas turbines and diesel generators.
Most sodium-based batteries are now made in China, and represent less than 1% of all batteries delivered this year. In the U.S., a number of startups have begun producing small numbers of such batteries, and are racing to scale up production. One industrial giant—General Motors —is in the process of designing its own sodium-based batteries to tailor them to different applications before moving to mass production.
https://www.wsj.com/business/energy-oil/china-free-batteries-made-from-salt-are-finally-here-cc1cd766?st=csyh7Z&reflink=article_copyURL_share
https://www.eurasiareview.com/10082026-pakistan-building-a-digital-and-green-future-oped/
By Dr. Hamza Khan
Pakistan’s youth bulge and three concurrent transitions—digital export growth, decentralised solar power, and data-driven agriculture—create an opportunity to link these sectors into a single, higher-productivity development model.
ICT exports and freelancing are already generating multi-billion-dollar inflows and a trade surplus, while rapid solar expansion (now supplying a majority of low-carbon power) can cut costs for firms and farms if storage, grids and pricing keep pace.
Agri-tech focused on water efficiency, satellite intelligence and inclusive digital platforms can raise farm incomes and resilience, but success depends on institutions that turn parallel gains into a connected system rather than isolated privileges.
Pakistan’s development debate is often trapped between crisis management and distant promises. A better reading of the country in 2026 is that three transitions are already underway: services are becoming digitally exportable, electricity is becoming decentralised and low-carbon, and agriculture is acquiring a data layer. The 2023 national census confirms an overwhelmingly young society, with roughly three-fifths of citizens below 25. That youth bulge can become either an employment burden or the workforce of a new production model.
The opportunity is not to celebrate IT, solar power and agri-tech separately, but to connect them. Digital exports can ease Pakistan’s foreign-exchange constraint; distributed energy can reduce costs for firms and farms; and data-driven agriculture can raise productivity while conserving water. According to the Pakistan Economic Survey’s technology chapter, Pakistan had 207.22 million telecom subscriptions and 160.9 million broadband connections by March 2026. The latest technology-export figures show receipts reaching approximately US$4.18 billion during July-May, FY2025-26, about 20 percent higher year on year, with US$373 million earned in May.
Digital Exports: Moving Beyond Low-Cost Labour
Technology is no longer peripheral. The Economic Survey records 34,420 registered IT and IT-enabled-services companies by March 2026. ICT exports produced a US$2.91 billion trade surplus during July-March, 86 percent of sectoral receipts, while verified technology-related freelancer inflows reached US$856.3 million in nine months and exceeded US$1 billion by May. This transaction-based figure is more defensible than broader US$1.6 billion estimates that may include additional categories.
Pakistan must now move freelancers and software houses from one-off assignments towards recurring contracts in artificial intelligence, cybersecurity, cloud services, gaming, fintech and business-process engineering. DigiSkills has delivered more than 5.51 million trainings, but scale must be matched by recognised certification, communication skills, intellectual-property protection and dependable connectivity. The Digital Nation Pakistan Act 2025provides a framework for digital public infrastructure and data governance. Its value will depend on whether firms can securely verify identities, receive payments, obtain credit and access public services efficiently.
https://www.eurasiareview.com/10082026-pakistan-building-a-digital-and-green-future-oped/
By Dr. Hamza Khan
Solar Power as Industrial Policy
Pakistan’s solar expansion is among the world’s most striking bottom-up energy transitions. A REN21 assessment estimated that net-metered rooftop capacity reached 5.3 GW by April 2025, nearly ten times its level two years earlier. Ember’s latest country dataindicate that low-carbon sources supplied 55 percent of Pakistan’s electricity in 2025. The recommended scenario in the IGCEP 2025-35 projects renewables, including hydropower, producing 69 percent of electricity by 2034-35, with solar and wind supplying 10 percent each.
Solarisation should be treated as industrial policy, not simply climate policy. Affordable daytime electricity can power software campuses, cold chains, food processing, electric mobility and small manufacturing. The danger is a two-tier system in which affluent consumers leave the grid while poorer households inherit fixed capacity costs. Pakistan needs storage, stronger distribution networks, time-of-use pricing and incentives for productive daytime demand. The transition will last only if it lowers economy-wide costs rather than shifting them between consumers. Pakistan’s own generation plan warns that after 2027, thermal plants alone may be unable to manage the ramping pressures created by rising solar integration, strengthening the case for battery storage and grid modernisation.
Agri-Tech: The Critical Convergence Test
The FY2025-26 agriculture survey reports that agriculture contributed 23.44 percent of GDP and grew by 2.89 percent. Yet surface-water availability was 92 million acre-feet, 11.1 percent below average system usage. Agri-tech must therefore focus on resource productivity, not fashionable hardware. Satellite crop intelligence, moisture sensors, weather forecasting, precision fertiliser use, digital marketplaces and solar-powered cold storage can reduce waste and improve margins. Solar irrigation, however, must be paired with groundwater monitoring or cheaper pumping could accelerate aquifer depletion.
The National Agri Stack roadmap offers an architecture based on verified farmer identities, integrated land data, satellite intelligence, digital payments, credit, crop insurance and market links. Three to four pilots were prioritised for the first 12-18 months. Inclusion will be decisive: tenant farmers, women, sharecroppers and farmers without clear land titles must not disappear from a system built around formal records. Success should mean higher incomes, lower post-harvest losses, improved water efficiency and faster finance, not merely more registered users.
From Parallel Successes to One Production System
Pakistan can create a circular development model: digitally skilled workers generate export income; renewable power lowers production costs; and digital platforms help agriculture use energy, water, finance and logistics more efficiently. This convergence can narrow the urban-rural divide because software, payments, advisory services and distributed electricity can reach places where large industrial investment may not. It also offers Pakistan a new export identity, one based not only on goods produced domestically, but on knowledge, digitally enabled services and climate-smart agricultural value chains.
The country is not guaranteed a digital and green future; it must build the institutions that make one possible. That requires stable internet, competitive energy markets, interoperable public data, cybersecurity, technical education, patient capital and transparent regulation. Pakistan’s most promising transformation is not any single sector, but a connected system in which code earns foreign exchange, clean power reduces vulnerability and intelligence applied to farms strengthens food security. The future will be secured when digital capability and green infrastructure become instruments of mass productivity rather than islands of privilege.
According to weekly report issued by the State Bank of Pakistan (SBP) on Thursday, the total liquid foreign exchange reserves held by the country surged to USD 23.716 billion as of Sep 4, 2026 compared to USD 22.528 billion as of Aug 28, 2026.
During the week under review, SBP’s foreign exchange reserves increased by USD 1.21 billion to USD 18.328 billion jump from USD 17.118 billion a week earlier. “The increase in SBP’s foreign exchange reserves is due to receipt of government of Pakistan commercial loan proceeds,” the report said.
https://www.brecorder.com/news/40438973/forex-reserves-surge-to-usd2372bn
However, net foreign reserves held by commercial banks declined by USD 22.5 million to USD 5.388 billion.
The SBP successfully met its foreign exchange reserves target for FY26, with its reserves surpassing USD 18 billion by the end of June 2026. For December 2026, the SBP has set a target of USD 20.20 billion.
https://www.adb.org/where-we-work/pakistan/economy
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Pakistan's GDP growth is expected at 3.7% in 2026 and 2027 – ADO September 2026
Pakistan's inflation rates forecasted at 7.1% in 2026 and 8.3% in 2027 – ADO September 2026
Figures are based on the latest edition of ADB's Asian Development Outlook, which analyzes economic and development issues in developing countries in Asia and the Pacific. This includes forecasting the inflation and gross domestic product growth rates of countries throughout the region.
Apparel industry pledges to ramp up exports
https://tribune.com.pk/story/2632324/apparel-industry-pledges-to-ramp-up-exports
The new team takes over as Pakistan's textile sector shows a modest growth. Textile and clothing exports rose 5.55% to $3.4 billion in July-August 2026-27 from $3.2 billion in the same period of last year, according to the Pakistan Bureau of Statistics data.
Readymade garments did better than most categories, with exports rising 13.59% in the first two months of the current fiscal year to $827 million.
The annual numbers show how little growth the sector managed to achieve last year. Textile exports in the previous fiscal year were up only 0.26% at $17.93 billion, while readymade garment exports rose 3.87% to $4.29 billion.
https://www.dawn.com/news/2034340
ISLAMABAD: Pakistan’s merchandise exports grew by 10.84 per cent in the first quarter of the current fiscal year (FY27), despite the trade gap widening on the back of rising imports, the Pakistan Bureau of Statistics reported on Friday.
In absolute terms, export proceeds stood at $8.43 billion in July-September, up from $7.59bn in the corresponding period last year.
Officials noted that the impact of budgetary measures on the export sector may become more apparent in the months ahead. Export proceeds grew despite Prime Minister Shehbaz Sharif’s clear displeasure with exporters’ performance.
In September, exports rose by 17.61pc to $2.94bn, from $2.49bn in the same month last year, suggesting a revival of the export sector.
Trade gap widens 15.13pc to $10.79bn in July-Sept
On a month-on-month basis, export proceeds rose 16.07pc.
In FY26, Pakistan’s merchandise exports not only missed the annual target by $4.87bn, but also contracted, reflecting the PML-N-led coalition government’s failure to achieve visible improvement over the last four years. Export proceeds also contracted by 5.97pc to $32.04bn.
The planning ministry had earlier projected that export proceeds would climb to $60bn by 2030 — a target that has largely remained confined to official documents. More recently, however, the same ministry revised the projection upward, setting a new target of $100bn by 2035.
Jawed Bilwani, Coordinator of the All Pakistan Exporters Association Forum, said exporters were struggling for survival amid unprecedented challenges, including high manufacturing costs, lack of competitiveness, and the absence of a level playing field.
He highlighted that Pakistani exporters operate on narrow profit margins compared to regional competitors, face higher taxes than other businesses, and endure prolonged delays in refund payments without compensation. He added that arbitrary FBR deductions, liquidity pressures, and high operational costs were crippling the sector.
Key Solar Energy Facts in Pakistan
Overtaking Nuclear: Solar generation (36.3 TWh) surpassed Pakistan's nuclear power generation (22.5 TWh) for the first time in 2025, marking an 85% year-on-year increase in solar output. [1, 2]
Installed Capacity: Distributed solar capacity reached an estimated 38 GW to 51 GW as households, farms, and factories rapidly adopted rooftop and off-grid systems. Net-metered capacity alone grew to 6.3 GW. [1, 2, 3]
Drivers of the Boom: Soaring national grid electricity tariffs, unreliable power supply, and sharply declining costs for imported Chinese solar panels (over 58 GW imported since 2017) triggered a massive market-led transition. [1, 2]
Policy Shifts: The government introduced a 10% sales tax on finished PV modules and replaced traditional net-metering with a lower-compensating net-billing framework to manage the rapid off-grid shift. [1]
https://mettisglobal.news/Pakistan-China-to-take-CPEC-beyond-infrastructure-64131
October 12, 2026 (MLN): Pakistan and China are moving the China-Pakistan Economic Corridor (CPEC) into a more ambitious second phase that shifts the focus from building infrastructure to industrial partnership, from government-led projects to business-to-business cooperation, and from bilateral connectivity to regional and global value chains.Buy Maps
The first phase delivered 43 projects worth about $25bn, including 17 energy projects that added around 8,900MW to the national grid, two coal mines, the Matiari-Lahore high-voltage transmission line, major transport links and some 200,000 direct jobs.
The new phase will be built around industrialisation as its main economic engine, with Pakistan positioned as a production and export base linking China with South Asia, Central Asia, the Middle East and Africa.
It will also widen into agriculture modernisation, responsible mining, data, artificial intelligence (AI), cloud infrastructure, e-commerce, cybersecurity, digital payments and industrial automation, while Gwadar is to move from a transit point to a hub that creates value through its port, free zone, logistics, fisheries, processing and tourism.
Federal Minister for Planning and Special Initiatives Ahsan Iqbal laid out the vision in an article published by China Daily, APP reported.
Recalling his association with CPEC since its start in 2013, he said the corridor’s strength lies in the two countries’ ability to think long term and find practical solutions together, rather than in any single project.
He said CPEC 2.0 will merge with URAAN Pakistan, the national transformation framework, whose priorities match the corridor’s five pillars of growth, innovation, green development, livelihoods, and openness and regional connectivity.
He said China is a partner and accelerator of Pakistan’s industrial upgrading while Pakistan remains the owner of its priorities, and that private enterprise is being brought to the centre of the corridor, with success measured by Chinese firms manufacturing profitably in Pakistan and Pakistani producers entering Chinese and global markets.
He said Pakistan is pursuing a deeper AI partnership with China covering joint research, computing infrastructure, skills, start-ups and responsible governance, and has proposed a Pakistan-China Knowledge Corridor as a central pillar of CPEC 2.0, backed by demand-driven training and apprenticeships.
He added that Pakistan offers Chinese companies a large market, a young labour force, natural resources and access to the Arabian Sea, and is adapting the principles behind China’s industrial transformation, including policy consistency, empowered institutions, infrastructure readiness and investment facilitation, to its own conditions.
He said the government’s commitment to protecting Chinese citizens, institutions and projects is unwavering, and that by 2047 the corridor’s strongest legacy will be a more capable Pakistan that produces, innovates and exports at a higher level.
https://profit.pakistantoday.com.pk/2026/10/27/pakistans-forex-reserves-rise-52percent-foreign-investment-up-20percent-exports-grow-11percent-in-q1-fy27
ISLAMABAD: Pakistan's foreign exchange reserves, exports and investment inflows increased during the first quarter of fiscal year 2026-27, according to a Ministry of Finance scorecard that excludes key economic indicators, including imports, inflation, per capita income and poverty.
The ministry's Pakistan Macro, Reform and Investment Scorecard for July-September 2026 reported that State Bank of Pakistan (SBP) foreign exchange reserves rose 52% year-on-year to a record $21.5 billion, while foreign direct investment (FDI) increased 20% to $720 million.
Total exports grew 11% to $11.2 billion, including an 18% increase in IT and technology exports to $1.25 billion. Workers' remittances rose 14% to $10.9 billion.
Total liquid foreign exchange reserves reached $26.8 billion, providing more than three months of import cover compared with 2.2 months a year earlier. The rupee appreciated 1.5% year-on-year.
However, the current account deficit widened to $874 million from $755 million in the corresponding quarter last year, indicating continued external account pressures.
The scorecard reported net foreign investment inflows of $3.65 billion, compared with a net outflow of $33 million a year earlier.
Foreign private investment increased 44% to $691 million, while foreign public investment recorded a net inflow of $2.96 billion against a net outflow of $512 million in the previous year.
Pakistan's sovereign credit ratings also improved, with Moody's upgrading its rating from Caa1 to B3 and S&P raising its assessment from B- to B. Fitch reaffirmed its B- rating, while all three agencies maintained stable outlooks.
The ministry highlighted a staff-level agreement with the International Monetary Fund (IMF) on the fourth review of the Extended Fund Facility (EFF) and third review of the Resilience and Sustainability Facility (RSF), which could unlock $1.2 billion following IMF Executive Board approval.
On the fiscal side, the Federal Board of Revenue (FBR) collected Rs3.1 trillion during the quarter, up 7% year-on-year and above its quarterly target. Income tax return filers increased 45% to 5.77 million.
The policy rate remained at 11.5% through September, compared with its June 2024 peak of 22%.
Pakistan's quiet resilience in first quarter of FY27
https://tribune.com.pk/story/2638311/pakistans-quiet-resilience-in-first-quarter-of-fy27
Start with the number that matters most in a crisis. The State Bank's foreign exchange reserves reached $21.5 billion, an all-time high, up 52% in a year. This safety net has kept the rupee stable, even gaining 1.5%, and keeps fuel, medicine and other essential imports flowing. Import cover has risen from 2.2 to 3.3 months, a vital breathing room in turbulent times.
Pakistan's earners didn't slow down either. Exports grew 11% to $11.2 billion, with September's goods exports the highest in 20 months. Technology stood out: IT exports rose 18% to $1.25 billion, and freelancers earned a record $550 million, up 46%. Picture a young developer in Multan or a designer in Peshawar winning clients in London and Dubai from a laptop.
Overseas Pakistanis once again showed how much home means to them. Remittances rose 14% to $10.9 billion, mainly from Saudi Arabia, the UAE, the UK and the EU, while the Roshan Digital Account has drawn $14.3 billion across nearly 976,000 accounts. Every dollar is a vote of confidence in Pakistan's future.
That confidence is spreading. Foreign direct investment rose 20% to $720 million while investors worldwide held back. All three major rating agencies have upgraded Pakistan into the 'B' category with stable outlooks, rewarding the fiscal discipline and steady engagement with lenders central to Finance Minister Aurangzeb's approach. The IMF programme is firmly on track, with a staff-level agreement reached for $1.2 billion.
Pakistanis at home are investing too. Stock market investors jumped 55% to over 656,000, and 85% of new investors are Gen-Z and Millennials. Four companies listed this quarter, raising Rs4.6 billion, roughly five times last year's total.
Pakistan's voice abroad is growing as well. On November 1, Pakistan became chair of the G-24, the bloc of developing countries founded in 1971 to coordinate positions on global finance. Finance Minister Aurangzeb, who will lead it, put it powerfully: "The future of developing economies is not peripheral to the future of the global economy. It is central to it." Pakistan will push for affordable development financing, fairer debt solutions and climate resilience. Prime Minister Shehbaz Sharif called it a "significant diplomatic milestone", and President Asif Ali Zardari termed it an important opportunity to represent the developing world.
What does this mean for businesses and jobs? The policy rate, which hit 22% in June 2024, now stands at 12%, and cheaper money is flowing. Loans to small and medium businesses rose 66% to Rs1.14 trillion, housing finance grew 72%, and lending to farmers and auto buyers rose roughly 31% and 34%. That means shops opening, homes built, harvests financed and jobs created.
The country is also learning to stand on its own feet. The FBR collected Rs3.1 trillion in three months, beating its target, while income tax filers jumped 45% to 5.77 million, reflecting the tax reforms and digitisation championed by the finance ministry. Government debt has fallen to 68% of GDP from 75% in FY23.
Momentum is visible on the ground too. Car sales rose 28%, cement and petroleum sales grew, and large-scale manufacturing is expanding. Privatisation of power distribution companies – Fesco, Gepco and Iesco – is advancing, drawing local and foreign interest. And when fuel prices rose, a Rs75 billion relief scheme reached more than 12 million citizens who depend on motorcycles, rickshaws and small cars.
https://www.bloomberg.com/news/articles/2026-11-03/pakistan-s-rebound-masks-deeper-problems-weighing-on-economy
Pakistan's economy is showing signs of recovery with a soaring stock market, record foreign reserves, and improving credit ratings, but the recovery remains far less convincing beneath the surface.
High energy costs, the war with Iran, and renewed militancy in Pakistan's border provinces are adding to risks for investors and pushing up inflation, which remained well above the central bank's target rate last month.
The country's dependence on external financing is a key economic vulnerability, and experts say that Pakistan will likely need another IMF bailout after its current arrangements expire next year to maintain stability.
Pakistan’s soaring stock market, record foreign reserves and improving credit ratings are signaling an economy on the mend. Beneath the surface, the recovery remains far less convincing.
High energy costs and the war with Iran have pushed up inflation, while renewed militancy in Pakistan’s border provinces is adding to risks for investors. Last week, the central bank raised interest rates by 50 basis points to 12%, warning that the inflation outlook had deteriorated as oil topped $100 a barrel and wheat prices rose. On Monday, the government said inflation remained well above the central bank’s target rate last month.
Higher rates may help contain inflation and imports, but they also risk further squeezing an already weak domestic economy. By suppressing demand, Pakistan can shore up its external finances, but at the cost of growth and household incomes, said Miftah Ismail, a former finance minister and IMF economist.
“There is a pressure valve, which has been shut,” Ismail said. “How long can this pressure be sustained? It will blast some day.”
The administration of Prime Minister Shehbaz Sharif has highlighted record foreign exchange reserves of $21.5 billion and a series of credit-rating upgrades this year as evidence of a turnaround. State Bank of Pakistan Governor Jameel Ahmad expects reserves to reach $25 billion by June, enough to cover more than four months of imports.
The improvement comes as Islamabad reached a staff-level agreement with the IMF last month that could unlock another $1.2 billion, taking disbursements under two separate arrangements to $5.7 billion if approved. The fund said Pakistan maintained economic stability despite elevated energy costs and supply disruptions.
Pakistan has already raised over $4 billion in global markets this year and is now seeking further ratings upgrades as it plans to tap global debt markets again, Finance Minister Muhammad Aurangzeb told Bloomberg TV last month.
Islamabad has also said it plans to diversify its sources of funding, moving away from deposits of billions of dollars it received in past from allies like Saudi Arabia, China and the UAE. Earlier this year, Pakistan asked the US for a $10 billion facility, looking to capitalize on improved ties with the Trump administration.
But that dependence on external financing is a key economic vulnerability, according to Ismail. He said the country’s heavy debt burden means it will likely need another IMF bailout after its current arrangements expire next year.
“If Pakistan stays in the IMF program, only then there will be stability,” he said. “If it comes out of it, then it will again get stuck.”
Pakistan is already on its 25th IMF bailout since joining the fund in 1950, including seven since 2000.
Meanwhile, new domestic political challenges have emerged. Supporters of jailed former Prime Minister Imran Khan have taken to the streets in recent months, prompting clashes with security forces. Militant violence has surged in the border provinces of Khyber Pakhtunkhwa and Balochistan, adding to security concerns for investors.
https://www.bloomberg.com/news/articles/2026-11-03/pakistan-s-rebound-masks-deeper-problems-weighing-on-economy
The strains come as Pakistan seeks to capitalize on its resurgent geopolitical position. The country, led by Sharif, became a key intermediary in peace talks earlier this year in the US-Iran war. President Donald Trump has hailed army chief Asim Munir as his “favorite field marshal” amid a rapprochement between the two nations after years of frosty ties.
Other challenges still lie ahead for the economy if it is to wean itself off foreign borrowing, said Mattias Martinsson, who manages $1.2 billion as deputy CEO at Tundra Fonder AB in Stockholm.
They include improving tax and regulatory coverage in Pakistan’s huge informal economy, as well as the country’s high corporate and personal income tax rates and high energy costs. Pakistan imports 80% of its oil requirement.
“Just creating more sources of borrowing is not the remedy for our economic issues,” said Shakil Anwer Kamal, a Karachi-based economist and capital markets expert. “A real solution will come only when we improve our own capacity to generate foreign exchange, which is possible only through exports, remittances, foreign direct investment, productivity and fiscal reforms.”
Martinsson said he is encouraged by the stability in the currency and the country’s rising stock market. The rupee has been stable and the benchmark KSE-100 index has soared more than 300% since 2023, a rally that investors said has largely been fueled by the lending program.
“It remains to be seen whether this can be sustained without support from the IMF,” Martinsson said.