Pakistan has failed to achieve two major economic targets for the current fiscal year, as both investment and national savings remained below official projections, raising fresh concerns about the country’s fragile economic recovery and long-term growth prospects.
Provisional estimates prepared by the planning ministry on the basis of National Accounts data showed that the investment-to-GDP ratio remained unchanged at 14.4% during the outgoing fiscal year, missing the government’s 14.7% target. The savings-to-GDP ratio performed even worse, falling to 14% against the official target of 14.3%.
The figures reflect continued structural weaknesses in the economy despite repeated government efforts to attract foreign investment and improve economic stability under reforms backed by the International Monetary Fund (IMF).
Economic analysts say the stagnation in investment is particularly concerning because sustainable growth requires stronger private and public sector spending on infrastructure, industry and productivity-enhancing projects.
Despite aggressive efforts to secure foreign inflows through various initiatives, investment activity remained sluggish throughout the fiscal year. Officials acknowledged that Pakistan continues to rely heavily on external borrowing to finance its fiscal and development needs, while export performance has also weakened significantly.
Exports declined by more than 6% during the first ten months of the current fiscal year, further increasing pressure on external accounts and foreign exchange reserves.
The disappointing investment numbers have also triggered internal discussions within the government regarding the future of trade liberalisation policies. Officials are reportedly reviewing whether to fully implement the second phase of trade liberalisation from July after the first phase resulted in a sharp rise in imports without generating the expected export growth.
Meanwhile, the much-publicised Sovereign Wealth Fund initiative has also failed to deliver meaningful results. The fund, launched three years ago to attract foreign capital and strategic investments, remained effectively inactive during the current fiscal year because of IMF objections to its legal framework.
To address those concerns, the government has introduced amendments to the Sovereign Wealth Fund law in the National Assembly. However, the Senate Standing Committee on Finance postponed consideration of the proposed amendments during its latest meeting.
Similarly, the Special Investment Facilitation Council (SIFC), established to accelerate investment approvals and attract foreign investors, was unable to secure major new foreign investment inflows. Officials say the council did help resolve procedural bottlenecks, particularly for domestic businesses, but broader investment momentum remained weak.
The fixed investment-to-GDP ratio also stayed below target at 12.7%, compared to the official goal of 13%. Private sector investment rose only marginally to 9.6% of GDP, still short of the targeted 9.8%.
Public sector investment weakened further as the government reduced the federal development budget by nearly Rs200 billion during the fiscal year. As a result, the public investment-to-GDP ratio declined to 3.1%.
For the next fiscal year, the government has proposed a development budget of Rs1.126 trillion, although actual spending will largely depend on whether tax collection targets are achieved.
Economists warn that consistently low investment levels are limiting Pakistan’s ability to improve infrastructure, education, healthcare and industrial productivity using domestic resources, forcing the country to rely increasingly on loans and external financing for development projects.
Finance Minister Muhammad Aurangzeb is currently visiting China in an effort to secure a $250 million loan through Chinese debt markets. The financing plan is reportedly backed by guarantees from the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank (ADB), as Pakistan’s current sovereign credit profile remains too weak to independently raise funds from Chinese capital markets.
The national savings rate also deteriorated during the fiscal year, slipping to 14% of GDP, nearly 0.9 percentage points lower than last year. Officials linked the decline partly to expectations of a current account deficit by the end of the fiscal year.
The provisional economic indicators suggest that Pakistan has now missed all three of its key macroeconomic targets for the year — economic growth, investment and savings.
Although the economy expanded by 3.7% during the fiscal year, economists say the pace remains insufficient to absorb the growing number of young people entering the labour market each year.
Concerns about employment pressures are growing amid projections that Pakistan’s population could rise by 62% to nearly 389 million by 2050, including an estimated 255 million people of working age.
Despite the broader slowdown, some sectors recorded notable increases in investment activity.
According to the National Accounts Committee, private investment in agriculture rose 8.7%, supported by higher imports of machinery and livestock-related spending. Small-scale manufacturing investment increased by 25%, while investment in electricity, gas and water supply grew 7.6%.
Unexpectedly, investment in the construction sector surged by more than 60% despite the overall slowdown in the real estate and housing market.
Investment in hotels and restaurants increased 12.8%, transportation and storage grew 6.2%, while the information and communication sector posted an exceptional 110% rise, reflecting expansion in digital infrastructure and telecom-related activity.
Public sector investment also recorded growth in selected industries. Manufacturing investment rose 97%, mainly because of spending by the National Radio Telecommunication Corporation. Investment in mining increased 25.9% due to projects undertaken by Oil and Gas Development Company Limited (OGDCL).
In the utilities sector, public investment increased 5.1%, driven largely by spending from Water and Power Development Authority (WAPDA).
Public investment in transport and storage expanded 51.2%, supported by expenditures from the Civil Aviation Authority and the Pakistan National Shipping Corporation.
Meanwhile, public sector construction investment grew 7.4%, led by development authorities including the Lahore Development Authority, Gwadar Development Authority and the Federal Government Employees Housing Authority.
Investment in the communication sector rose 31%, supported by purchases made by Ufone and preparations linked to Pakistan’s planned 5G spectrum auction.
