By Farooq Awan
Pakistan’s services sector kept the economy on track in 2024–25, emerging as the main source of growth when agriculture slowed and manufacturing struggled.
According to the State Bank of Pakistan’s (SBP) Annual Report 2024–25, the services sector expanded by 3 percent, up from 2.3 percent last year, making it the biggest contributor to the country’s overall 3 percent GDP growth.
Services Lead Economic Recovery
The SBP report said that growth came from several areas — government services, transport and storage, community services, and information technology.
Better coordination in economic policies and tighter control over public finances gave the government room to increase development spending, which directly boosted public services.
Meanwhile, improved monetary and external stability encouraged growth in logistics, communication, and digital services.
Confidence among both consumers and businesses also strengthened in the second half of the year.
Lower Inflation and Stable Currency Support Growth
The central bank noted that a stronger external account and lower inflation had a positive impact on services. A stable exchange rate and a sharp drop in the policy rate—from 20.5 percent to 11 percent between June 2024 and January 2025— reduced borrowing costs and encouraged investment.
This created more demand for services such as transport, storage, and finance, as domestic activity picked up.
ICT Sector Stands Out as a Growth Engine
Among all segments, information and communication technology (ICT) stood out. Pakistan’s push toward digital transformation continued to show results. ICT exports maintained steady growth, while the volume of mobile and internet banking transactions surged.
The SBP said this rise reflects both the public’s growing trust in online platforms and the economy’s shift toward technology-driven services.
Transport, Finance, and Government Services Show Strength
The transport and storage sector also showed strong gains, supported by more trade activity, construction, and industry revival.
The report said higher movement of goods and passengers showed that logistics networks were recovering after years of slow growth. Improved fuel supplies, stable energy prices, and new investment by logistics firms helped this rebound.
In the banking and finance sector, easier credit and better financial conditions led to higher lending and improved performance.
Government services were another major growth driver. Increased spending by provincial governments on education, healthcare, and infrastructure created new jobs and improved service delivery.
The SBP said better coordination between federal and provincial spending also helped improve fiscal transparency.
Trade Growth Slows but Urban Retail Recovers
The wholesale and retail trade sector — the largest part of services — grew only slightly. A weak performance in agriculture and large-scale manufacturing limited the supply of goods for trade. Still, urban retail activity started to recover gradually as inflation cooled and purchasing power stabilized.
Employment and Youth Opportunities on the Rise
Employment data showed modest improvement, especially in manufacturing and ICT-related jobs. The SBP said rising business confidence and job creation indicated that the labor market was slowly responding to the broader economic recovery.
Pakistan’s growing youth population, along with increased digital literacy, is opening up new opportunities in e-commerce, fintech, and online education.
Challenges and the Way Forward
Despite the positive trend, the SBP warned that the services sector still faces low productivity, limited diversification, and high informality. Many small, unregistered businesses contribute little to tax revenues and limit overall efficiency.
The report suggested digitizing small businesses, bringing them into the formal economy, and investing in vocational training to align skills with the needs of technology-based industries.
A Stable Future Through Services
The central bank said the resilience of the services sector continues to keep Pakistan’s economy afloat, even when agriculture and manufacturing face setbacks.
By promoting digitization, expanding financial inclusion, and improving public service governance, Pakistan can turn its growing services sector into a strong foundation for long-term, inclusive growth.
Author Profile
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Farooq Awan is a meticulous finance correspondent focused on Pakistan’s growth engines.
His reporting, driven by State Bank data, details the services sector's resilience and 3% expansion as the primary force behind GDP recovery. Awan highlights the critical role of ICT and stable policy in driving this essential economic digital transformation.
