Boosting Domestic Savings & Investment – Business
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Pakistan’s Economic Recovery: A Pivotal Moment
Table of Contents
Current Economic Situation
As of late, macroeconomic conditions have improved – with inflation falling and growth gradually recovering – but structural challenges such as low domestic savings persist, with a savings rate of just 7.4 per cent of GDP, compared to 27pc in South Asia and 41pc in East Asian economies.
State Bank of Pakistan (SBP) Governor Jameel Ahmad says due to a low savings rate,Pakistan heavily relies on foreign inflows to meet its advancement needs. “But this reliance has come at a cost,” he added. “it has contributed to repeated balance of payment crises, instability in the foreign exchange markets and inflationary pressures, which, over time, have weakened our growth momentum.” In order to avoid the boom-bust cycle, Pakistan needs to mobilise more domestic savings and channel them into productive investments. The country’s low savings rate, coupled with declining investment, he notes, has constrained long-term growth prospects.
Declining Investment Trends
According to the Pakistan Bureau of Statistics, private investment has declined from nearly 12pc of GDP in 2008-09 to just 9pc in 2024-25. Together, public investment has also fallen sharply, from 4pc to 2.9pc of GDP.
| Investment Type | 2008-09 (GDP %) | 2024-25 (GDP %) | Change (GDP %) |
|---|---|---|---|
| Private Investment | 11.8% | 9.0% | -2.8% |
| Public Investment | 4.0% | 2.9% | -1.1% |
External Position and IMF Support
while observing that the revised Macro Profile score is underpinned by Pakistan’s improving external position, Moody’s Ratings notes: “Nonetheless, Pakistan’s external position remains fragile.Its foreign exchange reserves remain well below what is required to meet its external debt obligations, underscoring the importance of steady progress with the IMF programme to continually unlock financing.”