Pakistan's Economic Growth Falls Short of Targets Amid Rising Borrowing Plans

Pakistan's federal government has missed its economic growth target for the fiscal year 2024-25, achieving only 2.68% growth instead of the expected 3.6%. The country's economic output reached USD 411 billion, with varied sector performances. As part of its strategy to address financial challenges, Pakistan plans to raise USD 4.9 billion in external commercial financing for FY2025-26, including loans from major international banks. The IMF has also set a target for the nation to boost its foreign exchange reserves. Read on to explore the implications of these developments.

By Narendra Chaudhary May 21, 2025, 09:12 IST

Economic Growth Rate Below Expectations

Islamabad: The federal government of Pakistan has reportedly not met its economic growth target for the fiscal year 2024-25, achieving only a growth rate of 2.68 percent compared to the anticipated 3.6 percent, as indicated by sources from the National Accounts Committee.

This information was disclosed during a meeting led by the Secretary of Planning for Pakistan, where the country's economic output was noted to have reached USD 411 billion, with per capita income rising to USD 1,824.

Sector performance showed disparities; agriculture experienced a growth of 1.8 percent in the first three quarters, while the industrial sector saw a decline of 1.14 percent. In contrast, the services sector demonstrated remarkable growth of 39 percent from July to March.

Plans for External Financing

In addition, Pakistan is gearing up to secure USD 4.9 billion in external commercial financing for the upcoming fiscal year (FY2025-26), according to informed sources.

The government's financing strategy includes obtaining USD 2.64 billion in short-term loans from commercial banks, with anticipated interest rates ranging from 7 to 8 percent, without stringent conditions or performance metrics.

Moreover, an additional USD 2.27 billion is expected to be raised through long-term borrowing from commercial banks, with efforts focused on engaging four major international banks.

International Financial Support

This financing plan includes a proposal to secure USD 1.1 billion from the Industrial and Commercial Bank of China (ICBC), along with USD 500 million each from Standard Chartered Bank and Dubai Islamic Bank. Additionally, a commercial guarantee is being sought for a USD 500 million loan from the Asian Development Bank (ADB).

Meanwhile, the International Monetary Fund (IMF) has set a goal for Pakistan to increase its foreign exchange reserves to USD 13.9 billion by the end of June. Currently, the State Bank of Pakistan holds net reserves of around USD 14 billion, which is reportedly sufficient to cover three months' worth of imports.