An independent think tank has raised serious questions over Pakistan’s reported economic growth of 3.7% in the first quarter of the current fiscal year, arguing that the expansion exists largely on paper and does not reflect a genuine increase in productive economic activity.
In a detailed brief, the Economic Policy and Business Development (EPBD) think tank described the first-quarter growth as the outcome of “methodological artefacts” and import-dependent assembly operations rather than a broad-based expansion in domestic production capacity. According to the EPBD, several data patterns suggest that the reported growth rate is disconnected from ground realities and actual business activity.
The EPBD board of governors includes prominent business figures such as Arif Habib, Gohar Ijaz and Fuwad Mukhtar, while its chief executive officer is Ahmad Nawaz Sukhera, a former cabinet secretary. The think tank is the first independent body to publicly scrutinize the growth figures approved this week by the National Accounts Committee, which endorsed a 3.7% GDP growth for the July–September quarter of FY2026.
The report noted that in the absence of sustained business expansion, productivity gains and investment-driven output growth, headline economic growth remains confined to statistical adjustments. It stressed the need for enabling policies that allow businesses to operate freely and for a stronger focus on the private sector–led investment to achieve durable and inclusive economic growth.
EPBD highlighted several inconsistencies in the official data. Food exports declined sharply by 25.8% during the quarter, while food imports surged by 18.8%. Despite this, agriculture and food manufacturing sectors reportedly posted positive growth. Similarly, transport-related imports more than doubled, yet the construction sector was shown to have expanded by over 21%. Cotton production declined, but textile exports recorded growth, largely driven by imported synthetic fibres rather than domestic raw materials.
Prime Minister Shehbaz Sharif and Finance Minister Muhammad Aurangzeb have welcomed the 3.7% growth rate, calling it a sign that Pakistan is transitioning from a prolonged stabilization phase to accelerated growth. However, the EPBD argued that the divergence between domestic output figures and external trade performance reveals structural weaknesses. According to the report, while overall GDP growth was reported at 3.71%, food exports collapsed and imports surged, exposing a lack of competitiveness in domestic production.
The think tank described the reported 9.4% industrial growth as a result of deflator manipulation. It pointed out that the electricity sector’s 25.46% growth was largely driven by a sharp increase in subsidies from Rs20 billion to Rs118 billion, rather than a real rise in output. Methodological inflation adjustments, it said, masked stagnation across key industrial segments.
In agriculture, livestock growth of 6.29% was attributed to lower input costs rather than productivity improvements, while green fodder production fell by 14.4%. Construction growth, the report added, was fueled by imported machinery and equipment, not domestic manufacturing. Data showed construction expanding by 21% as transport imports surged dramatically, with bus and truck imports jumping by more than 1,100%.
The EPBD also highlighted contradictions in the textile sector. Cotton production declined by 1.2%, cotton ginning fell 12.1% and cotton-based exports dropped around 10%. Despite this, textile exports grew 7.3%, driven almost entirely by finished goods produced using imported synthetic fibres.
Manufacturing growth of 5.78% coincided with a 13.2% rise in machinery imports, a 383.5% surge in mobile phone imports and a 21.2% decline in chemical and pharmaceutical exports. According to the think tank, this pattern reflects consumption and assembly-based activity rather than an expansion in productive capacity.
The report further noted that agricultural output was expected to remain flat or decline due to flood impacts, yet the sector recorded 2.89% growth. Important crops output dipped 0.75%, with no wheat crop harvested in the first quarter. Construction growth also outpaced cement production, which rose only 15%.
EPBD concluded that when intermediate consumption declines for non-productivity reasons, gross value addition rises mechanically without real output growth. It warned that high interest rates, heavy taxation, elevated energy prices and inconsistent policies continue to undermine Pakistan’s manufacturing and export sectors, as imports rose 11% in the first half while exports fell nearly 9%.
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