Over the past eighteen months, Pakistan has undergone a decisive economic correction. Under the leadership of Prime Minister Muhammad Shehbaz Sharif, the government has shifted the country away from fiscal strain and volatile markets toward stability, restored confidence, and renewed international engagement. Prudent financial management, structural reforms, and proactive diplomacy have begun reshaping an economy long weighed down by systemic weaknesses.
Stabilising the economy
When the government took charge, Pakistan faced record inflation, shrinking reserves, and persistent deficits. Instead of resorting to short-term fixes, it pursued reforms that strengthened the foundations of fiscal discipline. The digitisation of the tax system, improvements in SOE governance, and difficult energy-sector corrections helped restore credibility with multilateral partners.
Finance Minister Muhammad Aurangzeb notes that these interventions have led to tangible macroeconomic stabilisation, reflected in improved credit ratings, better investor sentiment, and successful IMF reviews. Inflation, which had soared to 38 per cent in mid-2023, has now fallen to near 1 per cent, one of the sharpest regional disinflation cycles. As inflation eased, the State Bank gradually reduced the policy rate from 22 per cent to around 12 per cent, lowering borrowing costs and clearing the way for growth.
At the external front, remittances hit an all-time high, over USD 38 billion, providing critical support to reserves and the exchange rate. The current account, historically in deficit, recorded a surplus in FY2024–25, signalling a structural shift driven by disciplined import management and stronger inflows.
Laying the groundwork for growth
The government’s goal now extends beyond stabilisation. Through the Special Investment Facilitation Council (SIFC), Pakistan has introduced a unified, investor-friendly mechanism that streamlines decision-making and encourages foreign and domestic investment. The SIFC has drawn interest in energy, minerals, agriculture, and IT, positioning Pakistan for an export-oriented economic model rooted in productivity and competitiveness.
As the finance minister emphasises, macroeconomic stability is the beginning, not the culmination, of a broader transition toward sustainable growth, job creation, and technological advancement.
A new era of economic diplomacy
A defining feature of Pakistan’s renewed engagement is the Saudi-Pakistan Economic Cooperation Framework, launched in Riyadh on 27 October 2025. Building on decades of brotherhood, the framework expands cooperation in energy, mining, tourism, IT, and food security, with new joint studies on regional electricity connectivity and enhanced private-sector involvement.
A Saudi-Pakistani Supreme Coordination Council will oversee implementation, ensuring that both countries move from pledges to measurable outcomes. The alignment of Pakistan’s Reform Agenda 2025 with Saudi Arabia’s Vision 2030 strengthens the foundation for a long-term strategic partnership.
Momentum accelerated immediately after the announcement: during 11–13 November, intensive engagements in Riyadh led to the signing of 38 new Letters of Intent in areas such as skill development and youth employment, positioning Pakistan’s workforce as an important contributor to the Kingdom’s economic transformation.
Strengthening Pakistan’s global image
The government has complemented economic reform with soft-power diplomacy aimed at projecting stability and constructive engagement. The revitalised partnership with Saudi Arabia enhances Pakistan’s role in the Islamic world and underscores a shift toward economic diplomacy built on shared prosperity rather than dependency.
A defining phase
Under Prime Minister Shehbaz Sharif, the country has regained macroeconomic stability, restored international confidence, and reoriented its foreign policy toward strategic economic cooperation. The Saudi-Pakistan Economic Cooperation Framework represents Pakistan’s determination to transform challenges into opportunities and anchor its future in reform, transparency, and regional partnership.
As Pakistan deepens its engagement with global partners, this new phase promises renewed confidence, stronger regional ties, and a more resilient economic trajectory.
