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Business Recorder
2 days ago
- Business
- Business Recorder
Between optics and austerity
Pakistan's economic policies resemble a car with two drivers, each pulling the wheel in opposite directions. One foot accelerates through aggressive fiscal spending; the other jams the brakes via tight monetary policy. This conflicting approach makes genuine economic progress nearly impossible. Consider the recent policy stance of the State Bank of Pakistan (SBP). For most of fiscal year 2024–25, the SBP held interest rates at a punishing 22 percent, aiming to tame inflation. As inflation rates began to decline from over 22 percent in June 2024 to around 15 percent in November 2024, the central bank still kept rates high. According to the latest Pakistan Economic Survey 2024–25, by the fiscal year-end, inflation settled remarkably lower at 4.6 percent, validating the case for a timely rate cut. In 2025, rates were gradually reduced to 11 percent, following a final 100 basis points cut in May. This delayed monetary adjustment came with a heavy cost: interest payments soared to Rs7.764 trillion over the full year, consuming the largest share of current expenditures and crowding out space for development-oriented initiatives. Since most government securities were on floating rates, earlier relaxation of the monetary stance could have sharply reduced this burden. Such heavy borrowing costs inevitably restricted the government's budgetary room for essential public investment. The IMF has repeatedly flagged that prolonged high interest rates, while slowing inflation, also compound the fiscal burden by inflating domestic debt service costs, creating a self-defeating loop for developing economies. Pakistan's own data reflects this policy mismatch, as the IMF noted that real GDP growth in the first two quarters of FY2024–25 remained subdued—1.3 percent and 1.7 percent—despite easing headline inflation. The Economic Survey confirms the full-year GDP growth eventually stood at 2.7 percent, highlighting the missed opportunity for higher growth had the central bank pivoted sooner. At the same time, fiscal authorities projected ambitious numbers. Gross revenue receipts for FY2024–25 were budgeted at Rs17,815 billion, with Rs12,970 billion targeted from FBR taxes. However, the Pakistan Economic Survey 2024–25 revealed that the FBR collected a total of Rs10.23 trillion, falling short by a staggering Rs1.03 trillion—roughly 8 percent below target. This shortfall was concentrated in sales tax and customs duties, which underperformed due to import compression and disinflation, eroding the tax base. Sales tax collections suffered as inflation cooled and domestic consumption slowed, while customs duties fell alongside declining import volumes. In contrast, income taxes showed relative resilience, primarily because they were collected at source — via employer deductions and AWT through telecom providers — rather than through voluntary compliance. To compensate for the gap, the government leaned heavily on non-tax revenues, particularly the extraordinary SBP profits of Rs2.5 trillion (midyear figure). But these profits are tied to high interest rates and will shrink drastically as the central bank lowers rates, making them an unreliable pillar for future fiscal planning. Moreover, these profits are not 'earned' in a conventional sense; they represent accounting transfers derived largely from interest paid by the government itself to the SBP on its own borrowing, which distorts the true fiscal picture rather than strengthening it. Despite these revenue struggles, however, the government showcased a strong primary surplus—officially Rs3,604 billion (2.9 percent of GDP) by December 2024, although the IMF's adjusted calculations placed it at Rs2,264 billion (2.0 percent of GDP), discounting one-off SBP profits. At first glance, this signaled fiscal prudence, but it came at the expense of critical long-term investment. By year-end, actual federal PSDP disbursements stood at just Rs564.5 billion out of a Rs950 billion revised allocation, reflecting continued underutilization. arlier in the year, only Rs296 billion had been spent by December, with verified SAP system disbursements even lower at Rs145.4 billion. According to the Pakistan Economic Survey, despite announcing an ambitious Rs4.224 trillion development budget for FY2025–26 (including both federal and provincial components), actual public development outlays in FY2024–25 fell short at Rs3.483 trillion, raising doubts about realistic planning. This sharp underutilization reflects a broader pattern: when budgetary room tightens, investment is the first casualty, regardless of stated priorities. Even the IMF acknowledged in its Article IV consultations that the surplus has been achieved primarily through expenditure compression—especially in public infrastructure spending—rather than through structural revenue improvements. It also highlighted that while headline inflation had eased to 0.3% month-on-month by April 2025, core inflation persisted at 9%, reflecting stubborn price pressures in non-volatile categories. Another silent drain on the economy often overlooked is the cost of managing a high-cash economy. During July–March FY2024–25, currency in circulation rose by Rs1,108 billion. This rising demand for cash reflects limited financial inclusion and forces the government to service liquidity needs at high borrowing costs, adding another layer of fiscal inefficiency. Simultaneously, regressive taxation persists, such as advance income tax deductions on mobile phone top-ups, disproportionately affecting the lower-income population. Defense spending, projected to rise by 12.2 percent to Rs2.4 trillion in the FY2025–26 budget by the IMF, reflects the security imperatives of a region marked by persistent tensions. While national defence remains non-negotiable — especially amid the ongoing security challenges posed by recent tensions with India — it reinforces the urgency of making what remains of the fiscal envelope count, particularly for social protection and growth-oriented projects. With 110 million citizens living below the poverty line, the challenge lies in balancing essential defence spending with meaningful investment in human capital. In recent developments, the National Economic Council (NEC) approved the Annual Development Plan for FY2025–26, allocating Rs4.224 trillion for development projects—Rs1 trillion earmarked for federal schemes and Rs2.869 trillion for provincial initiatives. The ambitious Rs4 trillion-plus allocation underscores the government's renewed commitment to key sectors like health, education, infrastructure, and housing. However, credibility remains in doubt. For FY2024–25, the federal PSDP was originally set at Rs1.4 trillion but was later revised downward to Rs1.1 trillion. As of May 2025, only Rs596 billion had actually been utilized—a staggering shortfall of over Rs800 billion. This underuse not only reflects fiscal constraints and delayed releases due to IMF-agreed targets, but also exposes the limited absorption capacity of ministries. The gap between announced intentions and actual execution continues to widen, reinforcing skepticism about whether the new targets represent genuine developmental intent or political optics. This pattern highlights a persistent policy disconnect: debt servicing, inflated by high interest rates, forces cuts in long-term investment. Capital spending, meant to boost sustainable growth, becomes the first casualty in a budget strained by security needs and costly borrowing. Compounding the challenge, total government debt surged by Rs6 trillion in the first ten months of FY2024–25, reaching Rs74.936 trillion due to increased borrowing amid revenue gaps. Externally, the economic picture shows paradoxical stability. According to the Economic Survey, Pakistan's current account surplus stood at $1.9 billion from July–April FY2024–25, largely due to a robust 30.9 percent surge in remittances. Foreign exchange reserves improved to $16.64 billion by May 27, exceeding IMF targets, and the exchange rate premium narrowed significantly. Meanwhile, one critical missing link is subnational fiscal performance. Provincial governments must urgently broaden their tax base—particularly through better collection of sales tax on services, property tax, and agriculture income tax. These are constitutionally devolved responsibilities, yet provincial revenue performance remains abysmal, with excessive reliance on federal transfers. Without a meaningful push to mobilize own-source revenues at the provincial level, the burden will continue falling on a narrow federal tax base already stretched to the limit. This disconnect between external calm and internal dysfunction only emphasizes the core incoherence: while monetary policy was stuck in overcorrection, fiscal management was running on promises and patchwork. Had the SBP lowered rates sooner, debt servicing costs would not have consumed half the fiscal oxygen. Had tax targets been met, they would have equaled nearly $3 billion—roughly matching a full year's IMF disbursement under the Extended Fund Facility. Instead, Pakistan finds itself spending more to service past borrowing, all while cutting the very investments that could fuel future growth. To escape this policy gridlock, Pakistan must replace its economic tug-of-war with synchronized steering. Fiscal discipline must mean more than cosmetic primary surpluses built on cuts to growth-oriented spending. Monetary policy must respond dynamically; taking into account inflation and the broader fiscal context. Tax reform must go deeper than administrative tweaks. And capital investment must stop being treated as optional. If both drivers can agree on a common direction—growth through coordination—there is still time to turn the wheel. But without that alignment, the vehicle will keep swerving off course, stuck in a loop of conflict, correction, and chronic stagnation. Copyright Business Recorder, 2025
News18
11-06-2025
- Business
- News18
Made In China No More? Beijing Goes Wild For Pakistani Donkeys. Here's Why
Last Updated: According to the Pakistan Economic Survey, the country's donkey population has increased from 5.5 million in 2019–20 to over 6 million in 2023–24. Pakistan's growing livestock export sector has found an unlikely star: the humble donkey. In recent years, the country has quietly become a key supplier of donkeys to China, where demand for their hides- used in traditional medicine- has created a billion-dollar industry. According to the Pakistan Economic Survey, the country's donkey population has increased from 5.5 million in 2019–20 to over 6 million in 2023–24, even as horse and mule numbers remain flat. This unusual growth is largely attributed to Chinese demand for ejiao, a gelatin extracted from donkey hides and used in traditional Chinese medicine for purported benefits such as improved blood circulation and anti-aging. Why China Wants Donkeys From Pakistan? China's domestic supply has sharply declined in recent decades, prompting it to look abroad. With several African nations placing restrictions on donkey exports, Pakistan has become one of the few countries willing to meet this demand. Dedicated farms and processing facilities have emerged in cities like Okara and Gwadar to support the trade. A $7 million donkey processing plant was recently opened in Gwadar, with plans to export up to 200,000 donkeys annually. Special breeds, including imported American mammoths, are also being reared to serve the market. How Exporting Donkeys Is Hurting Pakistan? While officials have described the development as an economic opportunity, concerns are rising domestically. Donkeys are a critical livelihood asset for many low-income communities in Pakistan. Used for transporting goods, water, and waste in both rural and urban areas, these animals are often central to a family's income. However, with export-driven demand pushing prices up, many workers are struggling to afford replacements. In cities like Karachi, a donkey that once cost Rs 30,000 can now sell for up to Rs 2 lakh. Adding to the issue, Chinese buyers are reportedly offering high prices for even weak or sick animals- sometimes up to Rs 40,000- just for their hides. This has distorted local markets and left poorer Pakistanis competing with exporters for basic working animals. First Published: June 11, 2025, 16:32 IST
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First Post
11-06-2025
- Business
- First Post
China is obessesing over Pakistan's donkeys. Here's how it is hurting the poor
Over the past three years, Pakistan has seen a steady rise in its donkey population, thanks to growing demand from its all-weather ally, China. The hides of the animals are used in the production of ejiao, a gelatin used in traditional Chinese medicine, But it is draining poor Pakistani of their livelihood read more Officials have shared that there are plans to export over 200,000 donkeys annually, and farms are now rearing special breeds, including American meant, for this meet China's demand. File image/Reuters The China–Pakistan friendship is often described as 'higher than mountains, deeper than the ocean, stronger than steel and sweeter than honey'. Now, even Pakistani donkeys seem to be playing a role in strengthening this bond. Over the past three years, Pakistan has seen a steady rise in its donkey population, thanks to growing demand from its all-weather ally, China. The humble farm animal is now turning into a valuable export for the cash-strapped nation. STORY CONTINUES BELOW THIS AD But as the demand rises, the profits aren't reaching everyone. Many local owners, who depend on the animal for their daily bread, are now finding it even harder to afford or replace them. For many, it's becoming a struggle to survive. So, what exactly is driving China's interest in Pakistani donkeys? And how is this booming trade creating problems for local communities? Here's a look at everything that's going on. The donkey boom in Pakistan Over the past five years, Pakistan's donkey population has seen a noticeable rise, and it continues to grow steadily. As per the Pakistan Economic Survey (PES) for 2023–24, the number of donkeys in the country has now crossed 6 million, up from 5.9 million the previous year. Earlier figures show a gradual climb — 5.5 million in 2019–2020, and 5.6 million in 2020–2021. Donkeys are, in fact, among the few animals in Pakistan whose numbers are on the rise. In contrast, populations of horses and mules have remained unchanged over the past five years, stuck at 0.4 million and 0.2 million, respectively. One key reason behind this growth is the rising demand from China and Pakistan's readiness to tap into this opportunity. To cater to this demand, dedicated donkey farms and slaughterhouses have been set up in areas such as Okara and Gwadar. In Gwadar, a $7 million facility was opened earlier this year specifically to process donkeys for export, mainly to China. STORY CONTINUES BELOW THIS AD Officials have shared that there are plans to export over 200,000 donkeys annually, and farms are now rearing special breeds, including American meant, for this growing market. Muhammad Hanif, 50, a labourer bathes his However, China earlier used to import its stock of donkeys from Niger and Burkina Faso, until the two West African countries banned their export. Since then, the country has become dependent on Pakistan for its supply. Dr Guo Jing Feng, who operates a medical centre in Karachi, highlighted that China's need for donkey hides is expected to rise further. 'This is now a global trade,' he was quoted as saying in a PTI report. 'And China's demand is much higher than its supply.' The Economic Survey also emphasised the government's focus on livestock as an economic driver. 'By implementing these measures, the government aims to stimulate growth in the livestock sector, generate employment opportunities, and contribute to the country's overall economic growth and food security,' the report stated. STORY CONTINUES BELOW THIS AD But why does China want Pakistan's donkeys? China is importing donkeys from Pakistan mainly to meet the rising demand for ejiao, a traditional medicine that's been used for over 3,000 years. Ejiao is made by boiling gelatin from donkey hides and mixing it with herbs and other ingredients. According to a 2019 report by The Guardian, it's believed to help with immunity, bleeding issues, sleep quality, and overall energy levels. To keep the ejiao industry running, an estimated 5.9 million donkey skins are needed — a demand that China's own shrinking donkey population can no longer meet. Pakistan, which has one of the largest donkey populations in the world, only behind Ethiopia and Sudan, has become a key supplier for China. Donkey traders say that Chinese buyers are so eager for hides that they're even purchasing weak or sick animals. In one such case, as reported by PTI, a group of buyers paid Rs 40,000 each for 14 unhealthy donkeys — just for their skins. STORY CONTINUES BELOW THIS AD China is importing donkeys from Pakistan mainly to meet the rising demand for ejiao, a traditional medicine made from donkey hides and has been in use for over 3,000 years. File image/ Reuters But it's not just the hides that interest China. In Hebei province, donkey meat is considered a delicacy. Dishes like donkey meat burgers, or lǘròu huǒshāo in Chinese, are popular street foods, especially in cities like Baoding and Hejian. On paper, a flourishing donkey trade looks like a win-win situation for cash-strapped Pakistan. But in reality, the boom in exports is having a painful impact back home. How China's craze for donkeys is crushing Pakistan's poor While the export of donkeys might seem like a good economic opportunity, it's creating serious problems for people in Pakistan who rely on these animals for their daily livelihood. In rural and low-income areas across the country, donkeys play a crucial role. They carry water, transport bricks, pull carts, and do other hard labour that machinery often can't manage. While the export of donkeys might seem like a good economic opportunity, it's creating serious problems for people in Pakistan who rely on these animals for their daily livelihood. File image/ Reuters A 2019 study by equine charity Brooke estimated that a single donkey transports up to 1,000 kilograms of non-recyclable waste and 100 kilograms of recyclable waste every day. Dr Sher Nawaz, regional manager of Brooke Pakistan (Sindh), told The Dawn that each donkey supports around six people, helping them earn between Rs 1,000 and Rs 1,500 a day. STORY CONTINUES BELOW THIS AD But with China's demand rising, so are prices, pushing donkeys out of reach for many workers who desperately need them. Just last week, Abdul Rasheed found himself in crisis after his donkey, Tiger — his only means of income — died in an accident. Now, without a cart, he has no way to earn a living. But buying a new donkey is simply too expensive. Prices have soared to Rs 2 lakh in cities like Karachi, far more than the Rs 30,000 Rasheed paid for Tiger eight years ago. Even at Lyari, Pakistan's biggest donkey market, the cost of a healthy donkey has skyrocketed. Rasheed says the cheapest one he could find was Rs 1.55 lakh. 'How can I afford that? Even if I somehow buy one, what if it dies before I recover my investment?' he asked. But with China's demand rising, so are prices, pushing donkeys out of reach for many workers who desperately need them. File image/ Reuters And Rasheed isn't alone. Across the country, many others who rely on donkeys for their day-to-day earnings are struggling with the same problem. STORY CONTINUES BELOW THIS AD Beyond the economic pressure, the growing export trade is also raising ethical and religious concerns. Saleem Reza, a senior official of the Karachi Chamber of Commerce and Industry, pointed out a key issue. 'The government has to ensure even if donkeys are in demand by China, they must be sent there without being slaughtered in Pakistan,' he told PTI. 'Donkey meat is haram for us, and there has to be a process to ensure it is not used commercially, unethically, or illegally. There is a need to establish designated factories for the slaughtering and processing of hides and meat to ensure it does not circulate in Pakistani markets,' he added. As the trade grows, so do the questions. For people like Rasheed, it's not just about donkeys. It's about dignity, survival, and the quiet struggle to keep moving forward. With input from agencies
Khaleej Times
11-06-2025
- Business
- Khaleej Times
UAE jobs: Pakistan forms team to verify documents of citizens seeking work abroad
Pakistan has established a joint committee comprising members of the Federal Investigation Agency (FIA) and the Bureau of Emigration and Overseas Employment (BE&OE) to verify the documents and credentials of citizens seeking employment abroad, including in the UAE. The initiative aims to ensure that only eligible and law-abiding individuals are sent overseas, following concerns over the deportation of several South Asian nationals for involvement in begging and other illegal activities. "BE&OE, in collaboration with FIA, has formed an operational-level committee to strengthen coordination and verify emigrants' credentials, aiming to eliminate illegal migration," stated the Pakistan Economic Survey 2024–25, released on Monday. In response to increasing cases of deportation due to unlawful behaviour, the Pakistani government has intensified its scrutiny of immigrants. Authorities are now cancelling the passports of deportees, adding their names to a passport control list, and lodging First Information Reports (FIRs) against individuals repatriated for illegal activities such as begging. Stay up to date with the latest news. Follow KT on WhatsApp Channels. According to official data from the Pakistan Economic Survey 2024–25, more than 64,100 Pakistani citizens secured jobs in the UAE over the past year, making it the third-largest destination for Pakistani workers after Saudi Arabia and Oman. A total of 727,381 Pakistanis registered for overseas employment in 2024. Of these, 62 per cent (452,560) went to Saudi Arabia, followed by Oman with 11 per cent. The UAE absorbed 64,130 workers (9 per cent), while Qatar offered employment to 40,818 individuals (6 per cent). Bahrain and Malaysia hired 25,198 (3 per cent) and 5,790 (1 per cent) Pakistani workers, respectively. The UAE remains a key destination for Pakistani expatriates and is home to over 1.7 million Pakistanis—second only to Saudi Arabia in terms of South Asian diaspora population. In total, more than 5.5 million Pakistanis live and work across the Gulf region, while approximately 10.3 million are employed globally. Remittances To further enhance overseas employment opportunities, the Pakistani government issued 65 new licences to Overseas Employment Promoters in 2024, bringing the total number of active licenses to 2,264. Pakistani workers abroad play a vital role in the country's economy, contributing significantly to foreign exchange reserves. Remittances reached a record high of $4.1 billion in March 2025. During the July–April period of the 2025 fiscal year, remittances rose 31 per cent year-on-year to $31.2 billion, up from $23.9 billion. This growth is attributed to government and State Bank of Pakistan (SBP)-led structural reforms. The immigrant workforce in 2024 was predominantly made up of unskilled and semi-skilled labour, with a relatively low proportion of highly skilled professionals. According to the Economic Survey, 50 per cent (366,092) of immigrants were classified as unskilled, while 35 per cent (255,706) were skilled workers. Despite a slight decline compared to 2023, global demand for unskilled labour remains strong, particularly in the construction, domestic service, and agricultural sectors.
The Print
10-06-2025
- Business
- The Print
Pakistan raises defence spending by 19% but slashes overall federal budget
In Pakistan, unlike in the case of India, pension is not part of the defence budget. In the new budget, the defence allocation stood at 14.5% of Pakistan's total federal budget and around 2.2% of its GDP, which is projected at $411 billion (Rs 34.3 lakh crore). New Delhi: Pakistan, which has an overall debt of USD 274 billion, Tuesday raised its defence budget by a whopping 19 percent even as it cut its overall budget by 7 percent. Finance Minister Muhammad Aurangzeb unveiled the federal budget for fiscal year 2025–26 which stands at PKR 17.573 trillion (Rs 5.27 lakh crore), down 6.9% from the previous year. However, Aurangzeb announced a significantly increased allocation of PKR 2.55 trillion (approx Rs 76,500 crore) for defence, up from PKR 2.12 trillion (approx Rs 63,600 crore) in the outgoing fiscal. In FY25, Pakistan had allocated PKR 2.1 trillion (approx Rs 63,600 crore) for defence. Additionally, PKR 563 billion ($1.99 billion) was earmarked for military pensions, which are not included in the official defence budget. The new defence allocation accounts for 14.5% of Pakistan's total federal budget and around 2.2% of its GDP, which is projected at $411 billion (Rs 34.3 lakh crore). Including military pensions, total military-related expenditure for last year stood close to PKR 2.66 trillion (Rs 79,800 crore), or about 3.2% of GDP. In contrast, India's defence budget for 2025-2026 was marked at Rs 6.57 lakh crore, nearly nine times Pakistan's defence outlay and higher than Pakistan's entire federal budget. However, India's defence spending, which includes pensions, amounts to merely 1.9% of its GDP. The finance minister began his address tabling the budget in the National Assembly on Tuesday by announcing: 'This budget is being presented at a historic time when the nation showed unity (and) determination,' he said, hinting at the hostilities between India-Pakistan last month. 'The spirit with which we protected our national sovereignty, we need to ensure our financial security in the same way,' the minister said, as he outlined a series of economic reforms and fiscal targets. The country's Planning Minister, Ahsan Iqbal, had already hinted on Saturday that the government would be hiking its defence budget for the 2025-26 fiscal year. 'It is our national duty to provide the armed forces with whatever they need in this budget to bolster their capacity and defend our country in the future. It has been proven that we have a dangerous neighbour (India) who attacked us in the night, but we gave them a befitting response,' he was quoted as saying by Pakistan's Dawn. Also read: Pakistanis unhappy with govt accepting IMF demand to liberalise economy—'it's a death warrant' Big defence spend but slow growth and high debt The budget was presented a day after Aurangzeb unveiled the Pakistan Economic Survey 2024–25, which showed the country's economy had grown 2.5% in FY24 and was projected to grow 2.7% in FY25. While that marks a recovery from the -0.2% contraction in 2023, the growth remains below historical averages and lower than the 3.6% initially targeted for this year. The country's total debt now stands at PKR 76 trillion (approx $274 billion or Rs 22.89 lakh crore), of which PKR 51.5 trillion (Rs 15.45 lakh crore) was domestic and PKR 24.5 trillion (Rs 7.35 lakh crore) was sourced externally. In nominal terms, Pakistan's economy is estimated to have grown to $411 billion (Rs 34.3 lakh crore), still far below its regional peers. Aurangzeb, however, called the upcoming fiscal year a 'turnaround story' and projected a modest but stabilising recovery. He said global GDP growth was expected at 2.8%, placing Pakistan's outlook within a comparable international frame. The budget comes under the watchful eyes of the International Monetary Fund (IMF), with which Pakistan remains engaged under a reform-linked bailout programme. Amidst the 87-hour India-Pakistan conflict earlier last month, the IMF had cleared immediate disbursal of $1 billion on 9 May to Pakistan for economic reforms under a package approved last year and another $1.4 billion to reduce vulnerabilities to natural disasters. As part of this programme, Pakistan has committed to raising revenue and cutting its fiscal deficit. Subsequently, The 2025-2026 budget has set an ambitious tax revenue target of PKR 14.131 trillion (approx Rs 4.24 lakh crore), an 8.95% increase over last year's goal. However, the Economic Survey acknowledged the challenge of meeting this target amid sluggish growth and new trade tariffs from the US, Pakistan's largest export destination. Aurangzeb also announced on Tuesday, moves to procure cheaper energy by shutting down expensive power plants and attracting foreign investment from countries like Turkey in the oil and gas sector, underscoring Pakistan's deepening ties with Turkey. Pakistan's Parliament will now begin debating the budget on Friday, 14 June, after a two-day recess. Discussions will continue until 21 June, followed by debate and voting on grant demands and motions on 24 and 25 June. The Finance Bill 2025 is expected to be passed on 26 June, with supplementary grants taken up the next day. (Edited by Viny Mishra) Also read: Pakistan's economic reforms a pushback against elite but it may backfire
