'Mini-miracle': World in awe of Pakistan's economic rebound

With the Pakistan-India conflict catapulting both nations into the international spotlight, many have begun to notice the remarkable economic trajectory Pakistan seems to be treading on. An award winning journalist from Barrons has labelled Pakistan’s economy a "mini-miracle". 

Analysts have highlighted how Pakistan represents a missed opportunity for investors, citing the country’s rapidly improving macroeconomic indicators along with the improving health of the domestic capital and financial market. Data from the Pakistan Stock Exchange (PSX) suggests that the benchmark index of the exchange, KSE-100, has "tripled’ in just two years, indicating a great return on capital for foreign investors.

Moreover, reports indicate that Eurobonds maturing in 2031 have marked an improvement from 40 cents to 80 cents on the dollar. This means that investors are now willing to pay 80 percent of the bonds face value instead of a measly 40 cent. This improvement reflects growing confidence of international investors regarding Pakistan's ability to pay back its debt without defaulting.

Moody’s, an internationally acknowledged credit rating agency, also improved the domestic banking sector outlook from ‘stable’ to positive. Fitch, yet another renowned credit rating agency, also upgraded Pakistan’s economic outlook by boosting the country’s credit rating from CCC+ to B-. 

The chief investment officer of an internationally recognized capital management institution has outlined how India’s recent aggression towards Pakistan “won't likely knock Pakistan’s recovery off course” according to Barrons. The capital management company now holds the view that purchasing Pakistan’s debt is “not risky enough” anymore despite persisting Pak-India tensions.

However, the situation was starkly different two years ago, with inflation skyrocketing to approximately 38 percent and the economy being on the precipice of default. The State Bank of Pakistan (SBP) was able to rein in inflation, by raising interest rates from 10 percent to a staggering 22 percent. 

Since then, inflation has fallen significantly along with default being averted - owing to Islamabad reaching an agreement with the International Monetary Fund (IMF) regarding the disbursement of $7 billion of which over $2 billion have been disbursed till date. 

However, it was not just the IMF agreement that averted disaster but the benevolence of those nations that had extended credit to Pakistan. This is because these creditors, such as China, United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) allowed for Pakistan to roll over its debt, creating fiscal breathing space.

Another reason behind the recent praise Pakistan’s economy has received from experts is the current account. While the economy has witnessed large current account deficits historically, Pakistan recorded a large current account surplus of $1.2 billion in March 2025. Many analysts have outlined however that the current account surplus was a result of large remittance inflows, stemming from rising immigration levels.

Experts have commended lawmakers’ commitment to sticking to the roadmap provided to it by global lending institutions such as the IMF. However, given the state of the economy two years ago, Pakistan had no choice but to comply with IMF prescribed austerity measures.