Pakistan Misses Investment and Savings Targets Amid Economic Slowdown

َIslamabad: The government has failed to achieve two major economic targets — investment and savings — during the current fiscal year, as investment activity remained stagnant and national savings declined further despite official efforts to boost economic growth.

According to estimates prepared by the planning ministry on the basis of provisional national accounts data, the investment-to-GDP ratio remained at 14.4 percent, unchanged from the previous fiscal year but below the official target of 14.7 percent.

Officials said the economy could not achieve the desired improvement due to a lack of increased investment in productive sectors, despite multiple government initiatives aimed at attracting non-debt foreign investment.

The government also continued to rely heavily on borrowing to meet its financial requirements, while exports recorded a decline of more than 6 percent during the first ten months of the current fiscal year.

Sources revealed that policymakers are reconsidering whether to fully implement the second phase of trade liberalization from July, as the first phase led to a sharp rise in imports without significant improvement in exports.

The sovereign wealth fund established to encourage foreign investment has also remained inactive even after three years. The International Monetary Fund raised objections to its legal framework, prompting the government to introduce amendments in the National Assembly. However, the Senate Standing Committee on Finance postponed voting on the bill on Thursday.

Similarly, the Special Investment Facilitation Council has not succeeded in attracting substantial foreign investment, although it has helped resolve several administrative issues faced by local investors.

Public sector investment also declined, with its share in GDP falling to 3.1 percent, mainly due to a reduction of nearly Rs200 billion in the federal development budget.

For the next fiscal year, the government has proposed a development budget of Rs1.126 trillion, though actual spending will depend on revenue collection.

Economic experts warned that failure to achieve investment targets is weakening the government’s ability to address infrastructure and social sector challenges through its own resources, increasing dependence on loans for development projects.

Federal Finance Minister Muhammad Aurangzeb is currently in China, where he is seeking a $250 million loan from Chinese financial markets through guarantees from the Islamic Development Bank and the Asian Development Bank, as Pakistan’s credit rating is still considered insufficient for easy access to global financial markets.

The government also failed to meet three broader economic goals during the current fiscal year: economic growth, investment, and savings. Economic growth was recorded at 3.7 percent, which experts say is insufficient to create enough jobs for the growing number of young people entering the labor market.

Despite the broader slowdown, investment in the construction sector surprisingly surged by more than 60 percent. Investment in hotels and restaurants rose by 12.8 percent, transport and storage by 6.2 percent, and information and communication by 110 percent.

In the public sector, investment in manufacturing increased by 97 percent due to the National Radio Telecommunication Corporation, while investment in mining rose by 25.9 percent because of spending by Oil and Gas Development Company Limited.

Meanwhile, Pakistan successfully launched its first-ever “Panda Bond” in China’s onshore capital market. Under the issuance of bonds worth 1.75 billion RMB (around $250 million), investment offers exceeding 8.8 billion RMB were received, making the issue more than five times oversubscribed.

The government described the strong response as a sign of investor confidence in Pakistan’s economic recovery, reform agenda, and return to international financial markets.