A sharp 25% decline in Foreign Direct Investment (FDI) during the first five months of the fiscal year is casting a shadow over Pakistan’s recent macroeconomic stabilization, prompting calls from the business community for a fundamental shift towards an export-led growth strategy.
In a review of the nation’s economic performance on Friday, Mian Zahid Hussain, President of the Pakistan Businessmen and Intellectuals Forum, expressed cautious optimism but warned that structural weaknesses and climate-related disruptions pose significant risks to long-term prosperity.
The period from July to November 2025 saw a notable easing of inflationary pressures, with inflation receding to 6.1% in November. This disinflationary trend enabled the State Bank to continue its monetary easing, reducing the policy rate by 50 basis points to 10.5% in December.
Hussain, however, advocated for further cuts to a single-digit figure. “Lower borrowing costs are essential for industrial revival,” he remarked, stressing the need to “ensure this liquidity reaches the Small and Medium Enterprise (SME) sector.”
Pakistan”s external account registered a significant improvement, posting a current account surplus of $100 million in November 2025. This turnaround was substantially supported by robust worker remittances, which grew by 9.3% to reach $16.1 billion during the July-November period.
Despite the strong remittance inflows, Hussain highlighted the concerning drop in FDI to approximately $927 million in the same five-month period. “The reliance on remittances to mask a stagnant export base is a high-risk strategy,” he cautioned, urging a “decisive move toward the structural reform and privatization plan to cut energy prices to make our exports competitive.”
In a contrasting development, the Pakistan Stock Exchange (PSX) demonstrated remarkable performance, with the KSE-100 index soaring past the 172,000-point milestone. Hussain attributed this bull run to renewed investor confidence following the successful completion of the IMF’s Second Review under the Extended Fund Facility, which unlocked a disbursement of $1.1 billion.
On the fiscal front, the Federal Board of Revenue”s tax collection increased by 12% to Rs. 3.8 trillion between July and October, though it fell short of the official target. The business leader noted that the burden disproportionately falls on existing taxpayers, underscoring the urgent need to broaden the tax net to incorporate untaxed sectors.
While the World Bank and IMF have forecasted a GDP growth of 3.6% for the fiscal year 2026, potential threats loom. Flood-related damage to the agriculture sector, particularly an expected decline in Punjab’s crop output, could jeopardize food security and the supply of industrial raw materials.
Concluding his assessment, Mian Zahid Hussain urged the government to leverage the current stability. He argued that transitioning from a “stabilization mode” to a “growth mode” necessitates more than high interest rates and import restrictions, calling instead for energy price rationalization and a focus on climate resilience facilities to secure the economy”s future.