Pakistan’s inflation in October 2025 is expected to remain contained within the 5–6% range, according to the Ministry of Finance’s Monthly Economic Update & Outlook. Despite temporary pressures from flood-related supply disruptions and border closures, the report suggests that the overall inflation outlook remains stable and aligned with the government’s targets.
The Finance Division’s Economic Adviser’s Wing highlighted that while food prices have experienced short-term increases, strong fiscal and monetary management continues to anchor overall price stability. Headline inflation stood at 5.6% in September 2025, up from 3.0% in August but lower than the 6.9% recorded a year earlier. On a month-on-month basis, inflation rose 2.0% after two consecutive months of decline, with the quarterly average dropping to 4.2% compared to 9.2% in the same period last year.
The main contributors to inflation were education, health, clothing, and non-perishable food items, whereas perishable food prices eased. The Finance Division maintained that Pakistan’s broader economic recovery remains firmly on track, underpinned by strong performance under the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF), which have bolstered investor confidence.
According to the report, Pakistan’s Credit Default Swap (CDS) risk has declined by 2,200 basis points over the past fifteen months, reflecting reduced default risk. Additionally, the Sustainable Financing Framework achieved an “Excellent” alignment score from Sustainable Fitch, confirming adherence to global sustainability standards.
Fiscal indicators continued to strengthen during the first quarter of FY2026. Net federal revenues increased 231% to Rs3,269.8 billion, supported by a massive 721% rise in non-tax revenues from sources such as State Bank profits, petroleum levies, and dividends. The Federal Board of Revenue (FBR) recorded a 14% increase in tax collections. Meanwhile, total expenditures grew only 7.6%, allowing the government to post a federal fiscal surplus of Rs1.5 trillion and a primary surplus of Rs2.9 trillion, compared to a deficit in the same period last year.
The external sector demonstrated resilience, supported by rising exports and robust remittance inflows. During July to September FY2026, the current account deficit narrowed to $594 million from $502 million last year and even recorded a $110 million surplus in September. Exports increased 6.5% to $7.9 billion, driven by textile-related goods, while imports rose 8.3% to $15.4 billion due to higher petroleum and palm oil imports. Remittances surged 8.4% to $9.5 billion, mainly from Saudi Arabia and the UAE.
Industrial growth showed encouraging signs, with Large-Scale Manufacturing expanding 4.4% in the first two months of FY2026. Key sectors such as automobiles, cement, and electrical equipment posted strong gains. Automobile production rose sharply, with car output up 74%, trucks and buses up 105%, and jeeps and pickups up nearly 49%. Cement dispatches climbed 16% to 12.2 million tonnes, reflecting continued infrastructure momentum.
The Pakistan Stock Exchange (PSX) maintained its bullish trajectory, with the KSE-100 Index surging by 16,875 points in September to close at 165,493. Market capitalization expanded to Rs19.2 trillion by October 22, 2025. This rally was supported by global rating upgrades from Fitch, S&P, and Moody’s, and progress under CPEC Phase 2.0 and privatization efforts.
The Finance Division noted that Pakistan’s economic reform path—anchored in fiscal discipline, digital governance, and public-private partnerships—continues to enhance macroeconomic stability. Despite localized price shocks, the outlook remains positive, and the government expects to sustain growth through structural reforms and policy continuity.
On the global front, the IMF’s October 2025 World Economic Outlook projects global growth at 3.2% in 2025 and 3.1% in 2026. Advanced economies are forecast to grow by 1.6%, while emerging markets, led by Asia, will expand more rapidly. Inflation worldwide is expected to average 4.2% in 2025, gradually moderating as monetary policies ease across major economies.
The report concludes that improving conditions among Pakistan’s major trading partners, including the U.S., U.K., China, and the Euro Area, point to stronger export prospects in the months ahead.
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