Pakistan’s economy appears to be on a path to recovery, according to the latest Asian Development Outlook report. After facing a near-crisis situation characterized by soaring inflation, depleting foreign reserves, the devastation of 2022–2023 floods, the looming threat of default, and an overall grim outlook, the country has managed a tentative but significant rebound. Inflation, which once soared to 29%, has dropped to just 1.5% by February 2025. Foreign reserves, critically low just a year ago, have more than doubled. The agricultural sector, which was heavily impacted, has bounced back with record harvests.
However, despite these hard-won improvements, the country still grapples with deep-rooted challenges. Structural issues like rising debt, a shrinking industrial sector, and the ongoing exclusion of women from the workforce remain significant hurdles. While Pakistan’s recovery is a step in the right direction, it underscores the complex nature of economic stabilization in emerging markets, where each advancement is fraught with political, fiscal, and social obstacles.
Can Pakistan’s economy continue to recover after enduring severe turbulence? The Asian Development Outlook 2025 (ADO) suggests that Pakistan regained momentum in fiscal year 2024, as prudent macroeconomic management and progress on structural reforms helped stabilize the economy, reduce inflation, and restore investor confidence by attracting essential external financing.
