Pakistan defies odds with economic revival, says US publication

(Web Desk): Amid heightened tensions with India, Pakistan's economy has delivered a surprising performance, with annual inflation dropping from nearly 40% to close to zero, according to a report by the US-based publication Barron's.

The report describes what it calls an "economic miracle" in Pakistan over the past two years. It notes that not only has inflation plummeted, but eurobonds maturing in 2031 have surged in value—from 40 cents on the dollar to 80 cents. Meanwhile, the KSE-100 Index has also tripled in value during this period.

The government had entered into a "stabilization agreement" with the International Monetary Fund (IMF) last September. Under this agreement, the IMF approved a $7 billion Extended Fund Facility (EFF), of which more than $2 billion has already been disbursed to Pakistan.

According to Barron’s, the recent conflict with India is “unlikely to derail Pakistan’s economic recovery,” though domestic issues may still pose challenges to the recovery process.

Khalid Salami, a portfolio manager quoted in the report, said: “Pakistan is known for its economic ups and downs, but there are signs this time could be different.”

Pakistan’s path to stabilization began after a near-default crisis following the ousting of former Prime Minister Imran Khan in 2022–23. Allison Graham, Chief Investment Officer at frontier markets specialist Voltan Capital Management, said many feared Pakistan would default alongside Sri Lanka in 2023.

Instead, the State Bank of Pakistan hiked interest rates from 10% to 22%, pushing the country into recession but successfully curbing inflation. Last year, Pakistan also secured financial assistance from China, Saudi Arabia, and the UAE. Economic growth rebounded to a 2.5% rate.

Khalid Salami added that the current account is in surplus, and Pakistan is running a primary budget surplus (excluding interest payments)—a rare occurrence in recent years.

However, Pakistan's economy remains “relatively stagnant,” still heavily reliant on exports of cotton, garments, and grains, while India has advanced into modern sectors like IT and pharmaceuticals.

Salami noted that Pakistan is entering the IT outsourcing market later than others, but its IT exports have grown from nearly zero to around $3 billion annually in just a few years—although still far behind India’s $200 billion figure.