The economic stagnation in Pakistan is attributed to uncertainties within its fiscal, legal, strategic, and administrative framework, as per a report in the Pakistani media. Highlighting the country’s stable banking system and potential-filled factories, the report notes a lack of certainty affecting economic growth. Despite an increase in currency circulation by Rs 432 billion from July to December 2025, credit uptake has not followed suit, leading to a liquidity surplus.
Pakistan witnessed a significant decline in private sector lending, dropping from Rs 1,470 billion to Rs 135 billion year-on-year, indicating a 90.8% collapse. While deposits expanded rapidly compared to credit uptake, the imbalance underscores the need for a conducive business environment. The report also points out a “capital flight” scenario, with net foreign direct investment falling by 25.4% year on year, impacting the country’s overall foreign investment.
The report further reveals a deterioration in Pakistan’s current account position, shifting from a $503 million surplus to an $812 million deficit over the same period. It criticizes the strategy of reserve accumulation through borrowed liquidity, stating that it does not enhance competitiveness. Additionally, Pakistan’s debt dynamics reflect a growing debt burden, with central government debt reaching Rs 76,980 billion in October 2025, up 11.4% from the previous year.
