How Pakistan stabilised its way into poverty in 21 graphs |
How Pakistan stabilised its way into poverty in 21 graphs
The Pakistan Economic Survey arrives each June in two registers. The first is the press conference: growth is back, inflation has been beaten. The second is the statistical annex, which records, without adjectives, what actually happened—and this year it describes a stabilisation, real, hard-won, and worth defending. Except that it has so far fixed none of the things that made stabilisation necessary in the first place.
We have been here before—in 2000, in 2016, in 2019; the difference this time should be what we do next. Four root problems run through the tables: a tax system that collects too little and distorts what it touches; an exchange rate we manage for comfort rather than competitiveness; an industrial policy that keeps backing the wrong horses; and a fiscal federalism model that has quietly broken. The Survey documents all four.
The machine, in two paragraphs
Take one object and keep it in view: a Faisalabad textile exporter’s invoice. The price on it is in dollars. Almost everything behind it is paid in rupees (this refers to the gas, wages, taxes withheld along the way, the cotton). The rate at which those rupees convert decides whether the shirt behind the invoice is competitive in Hamburg or priced out by one stitched in Ho Chi Minh City. When the rupee holds still while our costs rise faster than our competitors’ costs, that shirt becomes more expensive without anyone announcing anything. Most of what this article describes, taxes, interest rates, subsidies, transfers between Islamabad and the provinces, eventually lands somewhere on that invoice.
One more tool and the toolbox is complete: most numbers in this article come in two flavors. Nominal numbers are counted in today’s rupees. Real numbers strip inflation out. After years of double-digit inflation, an entry in the budget (or a budget line in bureaucratspeak) can grow every single year in rupees while shrinking every single year in what it actually buys. Where the difference matters, the figures show both.
Start with what the government can rightly claim. Pakistan posted primary surpluses (revenues exceeding all spending except interest) in both FY2024 ( 0.9 per cent of gross domestic product) and FY2025 ( 2.4 per cent), the first back-to-back primary surpluses in roughly two decades.
What a primary surplus is, and why it is the test that matters
Take the government’s finance books and isolate one line that says: interest on past debt. If what remains is in surplus, today’s state is paying for itself; the red ink that remains is the bill for yesterday’s borrowing, not a new hole being dug. That is why creditors watch this number above all others. It separates a government living beyond its means from one carrying old debts while living within them.
Whatever one thinks of how the adjustment was distributed, the adjustment happened, and it is why default stopped being a question we worried about every day.
Inflation fell from a 29.2 per cent annual average at the FY2023 peak to 6.2 per cent over July–April this year. The monthly path deserves a wary eye rather than alarm. April’s reading was back in double digits year-on-year, at 10.9 per cent, and May’s (published after the Survey went to print) came in at 11.7. But both prints sit on exceptionally low bases from last spring, with the Gulf conflict’s energy pass-through arriving on top, and single months are unreliable witnesses: base-period comparisons shift sharply month to month, and administered-price adjustments can dominate the signal in any one reading. Whether disinflation has merely paused or genuinely ended is a question the next quarter will answer, and it is the single number we will be watching.
The disinflation we did get was food-led. Food inflation collapsed from over 20 per cent to under 4, while non-food has stayed sticky in the 7–8 per cent range.
Falling food prices are a blessing, but they are weather and global markets, not institutional capacity; they can also be a curse, because they point towards increased vulnerability among farmers and others who rely on farm earnings.
Reserves, meanwhile, have been rebuilt to about four and a half months of goods imports—the most comfortable position since FY2016, though, as the data clearly shows, we continue to oscillate in a narrow band far below the world average of around nine months of import cover (and the gap is wider than it looks: the world figure counts goods and services imports, a basis on which our own coverage falls below the headline four and a half).
Stabilisation, then, is genuine. The question the rest of the Survey answers is what we bought with it.
The bill arrived in the Social Protection chapter, in a single row of Table 16.1: 28.9 per cent of Pakistanis below the national poverty line in 2024-25, up 7.0 percentage........