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Hilal English

Pakistan in 2025: Challenges and Opportunities

January 2025

As Pakistan enters 2025, it stands at a pivotal crossroads: a resource-rich, strategically positioned Muslim nuclear power, striving to implement reforms, harness opportunities, and achieve sustainable prosperity.



Pakistan is bracing 2025 with high hopes on one hand, and a string of challenges on the other. The high hopes stem from the boundless potential of the country’s 241.49-million plus people, their land and its natural resources, and the strategic location of world’s lone Muslim-nuclear power.
How the country harnesses its immense untapped potential and addresses its challenges in 2025 and beyond will determine whether we, as a nation, are ready to propel ourselves onto a higher economic trajectory. All the necessary ingredients exist to build a stable, strong, and prosperous Pakistan, provided the reform process remains on track and yields tangible results.


Let us celebrate the fact that despite all the odds, Pakistan’s economy has entered the stabilization phase. The credit must go to the caretaker government, which managed to cap the runaway inflation, stabilize the rupee, and managed the balance of payment crisis following a string of some painful decisions.


Economy: Getting on Track
For the tangible growth of Pakistan, the economic and structural reforms should remain high on the agenda in 2025.
Let us celebrate the fact that despite all the odds, Pakistan’s economy has entered the stabilization phase. The credit must go to the caretaker government, which managed to cap the runaway inflation, stabilize the rupee, and managed the balance of payment crisis following a string of some painful decisions. The caretakers also focused on the country’s energy sector, where capacity payments, the electricity theft, and line and distribution losses had become unbearable.


In 2025, if there are no exogenous shocks, there will be a further slashing down of the key policy rates, which will help boost economic activity in the country against the backdrop of single-digit inflation and stable currency.


The momentum of the caretaker government was carried forward after the February 2024 elections, as the Finance Minister took a series of unpopular decisions to make Pakistan eligible for the International Monetary Fund's (IMF) USD 7 billion Extended Fund Facility (EFF).
In 2025, if there are no exogenous shocks, there will be a further slashing down of the key policy rates, which will help boost economic activity in the country against the backdrop of single-digit inflation and a stable currency.  
Foreign Investment and SIFC’s Crucial Role
The crucial role of the Special Investment Facilitation Council (SIFC) can never be overstated in helping stabilize the economy. The inclusion of the military leadership in the SIFC proved a strategic move, instilling confidence in foreign investors regarding the continuity of policies and security.
The military diplomacy via SIFC platform, offering a "single window" platform by simplifying the bureaucratic processes, aims to attract foreign direct investment (FDI) from friendly countries, especially the Gulf Cooperation Council (GCC) countries. 


The military diplomacy via SIFC platform, offering a "single window" platform by simplifying the bureaucratic processes, aims to attract foreign direct investment from friendly countries, especially the Gulf Cooperation Council countries.


The main focus areas of SIFC are defense, agriculture, minerals, information technology (IT), and energy. The objective is to make Pakistan an attractive destination for foreign investors. The SIFC has played a key role in promoting projects such as the Reko Dik Gold and Copper Reserves, which once get rolling, would contribute in changing the country’s economic landscape.  
The military's support on the economic front also ensured that the menace of smuggling, including the outflow of foreign currency from Pakistan, was brought under control. This was one of the main factors that helped the rupee to recover from the historic lows of more than 300 rupees to a dollar in August 2023 to the current levels of rupee 278 to 279 to a dollar.
In 2025, there are expectations that at least some of the Memoranda of Understandings (MoUs) that have been signed with friendly countries would get into the implementation phase, and boost the FDI inflows in Pakistan. 
At the same time, Pakistan needs to expedite the process of economic reforms, which according to many critics, remain slow-paced. However, the idea of bringing in technocrats like Mohammed Aurengzeb and for that matter his predecessor, Dr. Shamshad Akhter, to lead the finance ministry has helped keep the economic reforms on track. This trend must continue. 
Electricity Prices: A Cut in Sight
Electricity prices in Pakistan are the highest in the region, which is not just hurting the common man but also businesses and industries, making Pakistani products uncompetitive in the foreign markets. One prime reason for the high electricity costs is the capacity payments being made to the Independent Power Producers (IPPs). 
In recent months, contracts of five IPPs–HUBCO, Lalpir, Rousch, Atlas and Saba–have been terminated after mutual understanding. This has helped reduce the burden of capacity payments by PKR 70 billion annually, resulting in total savings of PKR 411 billion. Negotiations are now on for the downward revision of capacity payments with 16 other IPPs. Once this process is completed, its impact in terms of savings is expected to be around PKR 481 billion.
In 2025, such deals are expected to help slash the power rates, benefitting industries, businesses and the general public alike.  


The SIFC played a key role in promoting projects including the Reko Dik Gold and Copper Reserves, which once get rolling, would contribute in changing the country’s economic landscape.


Future’s Bet: IT Exports and Digital Entrepreneurship 
Pakistan’s IT sector is the country’s best bet to increase exports in the shortest possible time. In the last fiscal (2023-24, July-June), the country’s IT exports surged by 24 percent to USD 3.223 billion, compared to USD 2.596 billion a year earlier. 
In the first five months (July to November) of the current fiscal year (2024-25), the country’s IT exports posted an increase of 32 percent, reaching USD 1.530 billion, compared to USD 1.152 billion during the same period a year earlier. These exports include software development, animation, gaming, systems integration, and billing and telemarketing (call center) services.  The government is eyeing to push IT exports to USD 4.2 billion in the current fiscal year from the previous year’s USD 3.223 billion. 
The dynamism and entrepreneurship skills of Pakistan’s urban youth are reflected in this sector, which, according to a conservative estimate, provides employment to more than 2.3 million freelancers, contributing about 15 percent to IT exports.   
In recent months, Pakistan has faced criticism due to the slowdown in internet services and restrictions on various social media applications. These measures were linked to the installation of a firewall and the government's efforts to address activities it deems harmful to national security in the digital space. While national security is a crucial priority, it is important to balance this with the realities of the modern age, where the free flow of information and the digital rights of citizens play a vital role.
It is essential to take all the stakeholders onboard, from digital rights activists to IT company representatives and media organizations, for tackling the national security challenge in the domain of the virtual world.
But in a nutshell, the country’s vibrant and expanding IT sector remains the best bet for the country’s future. The government must ensure a conducive environment in which this sector can flourish and grow.   


Pakistan’s IT sector is the country’s best bet to increase exports in the shortest possible time. In the last fiscal (2023-24 July-June), the country’s IT exports surged by 24 percent to USD 3.223 billion compared USD 2.596 billion a year earlier.


CPEC: Great Expectations
The China-Pakistan Economic Corridor (CPEC) project remains central to Islamabad’s overall efforts to revive the country’s economy on sustainable foundations. 
In 2025, significant progress is expected in infrastructure projects. The top priority among the list is the Main Line-1 (ML-1) railways. In ML-1’s Phase-I, Karachi to Hyderabad and Hyderabad to Multan tracks will be upgraded. In the second phase, tracks from Multan to Peshawar will be built.
The CPEC has already boosted Pakistan's energy production capacity. In the short-term, it has resulted in some pain because of the increased capacity payments, but in the mid- to long-run, this enhanced power generation capacity will meet the country’s growing energy requirements, especially as Pakistan enters a high growth trajectory. 
As indicated by the Chinese leadership, the CPEC will be expanded further in the coming years, helping create jobs, stimulate industrial growth, and contribute to overall economic development. The CPEC remains a cornerstone of China's Belt and Road Initiative (BRI), which provides a direct-route from China's northwest to the Arabian Sea. The CPEC reduces China’s dependency on the Malacca Strait for trade and energy imports. 
Regional Trade 
Pakistan need not remain hostage to the false mantra that India remains vital for promoting regional trade. Pakistan must stick to its position that normal trade and diplomatic ties with India are not possible until New Delhi rolls back its August 5, 2019 unilateral steps in Indian Illegally Occupied Jammu and Kashmir that has been assimilated into the Indian union territory in violation of the UN resolutions and bilateral agreements.
Minus India on its east, Pakistan has its western and northern frontiers open to expand and develop trade routes not just with its immediate neighbors–Afghanistan, Iran, and China–but also beyond, to the Central Asian and the Middle Eastern countries. Pakistan already enjoys close relations with the Central Asian and the Middle Eastern states. In recent months, there have been a number of bilateral interactions between Pakistan and some of the key countries of both these regions centered around trade and investment.  
The ouster of pro-Modi government of Shaikh Hasina Wajid in Bangladesh this August has also created an opportunity for the both brother Muslim countries to expand relations in every sphere–from diplomacy and people-to-people contacts to trade. A second cargo ship from Pakistan arrived at Chittagong Port in Bangladesh in December 2023, marking the first direct shipment in over 50 years. Given the deep historical, religious and cultural ties, there is an immense opportunity for both these countries to expand their relations in every sphere.  


The dynamism and entrepreneurship skills of Pakistan’s urban youth is reflected in this sector, which according to a conservative estimate, provides employment to more than 2.3 million freelancers, contributing some 15 percent to the IT exports.


Diplomacy: The Bigger Picture 
Pakistan's diplomacy focuses on strengthening its traditional partnerships, including with China, the United States (U.S.), the GCC countries, the United Kingdom (UK), the European Union (EU), and Russia. Pakistan aims to expand diplomatic ties based on mutual interests, especially by enhancing trade and investment opportunities. 
In 2025, Pakistan will have to perform a high-wire balancing act between the competing interests of regional and global powers in its bid to expand its economic diplomatic interests while staying out of conflicts.  
On this front, a lot of ground has been covered in 2024. There were a number of high-level meetings with the GCC countries focused on promoting trade and investment. Similarly, China remained high on Pakistan’s priority list of diplomatic engagements in both civilian and defense spheres. CPEC, as discussed, has emerged as the focal point of the ties between the two countries, reflecting a closer defense cooperation.  
Pakistan was able to maintain steady relations with the United States in 2024, and it should strive to expand its engagements with Washington under the new Trump administration despite challenges. 


The China-Pakistan Economic Corridor project remains central to Islamabad’s overall efforts to revive the country’s economy on sustainable foundations.


One of the high-points on the diplomatic front for Pakistan was the 23rd Shanghai Cooperation Organization’s (SCO) Heads of Government Meeting in Islamabad on October 15-16. This event showcased Pakistan's commitment to regional cooperation, focusing on enhancing trade, economic collaboration, and financial integrity among member states. Pakistan’s also got elected to the prestigious seat of the United Nations Security Council (UNSC) for the term 2025-2026. 
However, with its immediate neighbors, especially India, the chances of any improvement in the relations appears bleak. The reason remains the belligerent attitude of the Hindu-nationalist government of Narendra Modi, which has further complicated the Kashmir issue with its August 5, 2019’s controversial measures as well as its hegemonistic designs, and the myopic anti-Pakistan and anti-Muslim policies. A cold-peace is what Pakistan should aim for with its hostile neighbor, while staying steadfast in raising the Kashmir cause on every front. Here, the government needs to show more focus, commitment and passion to highlight the plight of Kashmiris and advocate their right to self-determination.
The Taliban-ruled Afghanistan has also emerged as a challenge for Islamabad due to the fact that a number of terrorist groups are using the Afghan soil to stage acts of terrorism in Pakistan. While Pakistani security forces are battling terrorists 24/7 and foiling the enemy designs of destabilizing Pakistan, Islamabad needs to make greater diplomatic efforts not just with Kabul but all those capitals which engage with the Afghan Taliban. The sole aim of this exercise should be that the misuse of the Afghan soil against Pakistan or any other country must stop.
Acclaimed Peacekeepers  
Pakistan is one of the top troop-contributing countries in the UN peacekeeping missions. Currently, 2,607 Pakistani peacekeepers, including 125 female personnel, are deployed in seven UN missions.


Pakistan need not remain hostage to the false mantra that India remains vital for promoting regional trade. Pakistan must stick to its position that normal trade and diplomatic ties with India are not possible until New Delhi rolls back its August 5, 2019 unilateral steps in Indian Illegally Occupied Jammu and Kashmir that has been assimilated into the Indian union territory in violation of the UN resolutions and bilateral agreements.


Pakistan, which has been contributing troops to the peacekeeping operations since 1960, became part of peacekeeping operations in 1949 when the UN Military Observer Group in India and Pakistan (UNMOGIP) arrived to monitor the ceasefire what is now known as the Line of Control (LoC) in the disputed Jammu and Kashmir region.
Going forward, the Pakistan Armed Forces will continue to play their role in the international peacekeeping operations and act as Pakistan’s goodwill ambassadors wherever they get deployed. 
In 2025, Pakistan appears well-positioned to build on the hard work and sacrifices of the past year to solidify and expand its gains on the economic and diplomatic fronts. This is doable and within the reach.


The writer is an eminent journalist who regularly contributes for print and electronic media. 
E-mail: [email protected] 
X: @AmirZia1