Pakistan’s economy is expected to sustain its recovery momentum during fiscal year 2027, supported by improving macroeconomic fundamentals, continued fiscal discipline and a stable financial environment, according to the Finance Division’s Monthly Economic Update and Outlook for August 2026. The outlook indicates that the country entered FY2027 from a stronger macroeconomic position following sustained stabilisation efforts. At the same time, inflationary pressures could remain elevated in the near term as recent domestic price movements and changes in international commodity and energy markets continue to pass through to the local economy.
The Finance Division said Pakistan’s external sector is expected to remain broadly supportive during the coming months, with stronger exports, particularly textile exports, sustained workers’ remittances and continued export facilitation measures providing support to the balance of payments. These developments are expected to help ease external-sector pressures and maintain adequate foreign exchange reserves. However, geopolitical uncertainty and global energy prices remain important risks, particularly because changes in international energy and commodity markets can affect domestic inflation and the external account.
Pakistan entered FY2027 with stronger fiscal buffers and improved economic stability. Fiscal consolidation was a major feature of FY2026, with the overall fiscal deficit narrowing to 2.6 percent of gross domestic product, the lowest level recorded in more than two decades. The primary surplus reached 2.9 percent of gross domestic product, marking the third consecutive year in which Pakistan recorded a primary surplus. Prudent expenditure management and lower markup payments contributed significantly to the improved fiscal outcome, while Large Scale Manufacturing expanded by 4.98 percent during FY2026.
The positive economic momentum continued into the first month of FY2027. Relative exchange rate stability, continued macroeconomic discipline and easing price pressures supported the overall improvement in economic conditions. The combination of stronger fiscal management and greater stability has provided a more supportive environment for economic activity, although the Finance Division has stressed that continued policy discipline and structural reforms will remain important to preserve these gains and strengthen the economy’s ability to respond to external shocks.
The external sector also recorded a stronger start to FY2027. Workers’ remittances reached $3.63 billion in July 2026, increasing 13 percent from the same month a year earlier and 4.5 percent compared with the previous month. Goods exports recorded $3.01 billion during July, representing a 9.4 percent year-on-year increase and a 16.9 percent rise from the previous month, according to the State Bank of Pakistan. The simultaneous increase in remittances and exports strengthened foreign exchange inflows and provided an important buffer for the external account amid continuing uncertainty in global markets.
Imports also increased during the opening month of FY2027. Goods imports on a free-on-board basis reached $6.15 billion in July compared with $5.43 billion a year earlier, representing a 13.4 percent increase. Although imports grew faster than exports, improvements in remittances and other external-sector indicators continued to provide support. The current account deficit narrowed to $328 million in July 2026 from $529 million in July 2025, while foreign exchange reserves increased from $19.6 billion to $22.6 billion over the comparable period.
Pakistan’s technology sector continued to strengthen as an important source of export earnings and economic diversification. Information technology exports reached $417 million in July 2026, increasing 17.8 percent year on year, following record earnings of around $4.6 billion during FY2026. The performance highlights the growing contribution of technology-related services to Pakistan’s external earnings and reflects the increasing importance of the digital sector within the broader economic recovery.
The Finance Division noted that continued investment by major global technology companies, progress in domestic technology manufacturing, policy support for information technology exporters, digital payment reforms and the launch of 5G services are contributing to the development of Pakistan’s digital ecosystem. These developments are creating opportunities in areas including technology services, skills development and higher value-added exports. The expansion of the technology sector is therefore being viewed as an additional source of diversification alongside traditional export sectors.
Pakistan’s improving macroeconomic position also received external recognition during August, when Moody’s upgraded the country’s sovereign credit rating to B3 from Caa1 while maintaining a stable outlook. The rating action provides an additional external assessment of the improvement in Pakistan’s economic and financial conditions following the stabilisation measures implemented during the preceding period.
Financial market indicators also showed significant improvement compared with the previous year. The Pakistan Stock Exchange index stood at 177,696 on August 28, 2026, compared with 147,345 on the same date a year earlier, representing a 20.6 percent increase. The stronger market performance coincided with improvements in broader macroeconomic indicators and reflected greater activity in the domestic capital market.
The Finance Division’s comparison of key indicators shows that remittances increased from $3.2 billion in July FY2026 to $3.6 billion in July FY2027, while exports increased from $2.75 billion to $3.01 billion. Imports rose from $5.43 billion to $6.15 billion. The current account deficit improved from $529 million to $328 million, while foreign exchange reserves increased from $19.6 billion to $22.6 billion. The exchange rate improved from Rs281.8 per U.S. dollar to Rs277.5 per U.S. dollar over the comparable period.
Fiscal indicators also recorded a notable improvement. The fiscal balance for FY2026 improved from a deficit of Rs6,168 billion in the previous comparison to Rs3,313.4 billion, while the primary balance increased from Rs2,719.4 billion to Rs3,634.2 billion. These figures underline the scale of fiscal consolidation achieved during FY2026 and provide part of the basis for the Finance Division’s expectation that recovery momentum can continue during FY2027.
Despite the improvement across several major indicators, the outlook continues to identify risks that could affect the recovery. Geopolitical uncertainty and global energy prices could create renewed pressure on inflation and the external account, while international commodity price movements may continue to influence domestic prices. The Finance Division has therefore stressed the importance of maintaining prudent macroeconomic management and advancing structural reforms.
Overall, Pakistan’s economic outlook for FY2027 reflects stronger fiscal conditions, improved external-sector indicators, rising technology exports, greater foreign exchange reserves and a more stable financial environment. Continued growth in remittances and exports, alongside improvements in technology services and domestic economic activity, provides support for the recovery. However, maintaining policy discipline and implementing structural reforms will remain important for preserving macroeconomic stability, strengthening resilience against external shocks and supporting more inclusive economic growth during the new fiscal year.
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