The Finance Ministry of Pakistan has presented a comprehensive economic report to the National Assembly, highlighting the country’s improving macroeconomic indicators while cautioning against ongoing global risks. The report pointed to vulnerabilities arising from fluctuations in global commodity prices and geopolitical tensions, particularly in the Middle East, which could place pressure on imports, inflation, and the external account. In response, the government has outlined a proactive strategy aimed at maintaining macroeconomic stability and safeguarding fiscal space.
According to the report, authorities have implemented a high-level monitoring mechanism to track global commodity markets, with a focus on oil prices, while maintaining petroleum stocks and managing demand. Coordination among ministries has been strengthened to ensure timely responses to potential inflationary pressures. Additionally, austerity measures have been reinforced at both federal and provincial levels, targeting non-essential spending to protect fiscal balances.
The report underscored positive growth trends across major sectors. Pakistan’s GDP grew by 3.09% in FY2025, up from 2.60% in FY2024. Momentum continued into FY2026, with first-quarter GDP estimated at 3.71%, compared to 1.56% during the same period last year. Sectoral performance showed notable improvements: agriculture expanded by 2.9% in Q1 FY2026, up from 1.0% last year, industry grew strongly at 9.38%, compared to 0.12% previously, and services recorded modest growth of 2.35%, slightly higher than 2.24% in the first quarter of FY2025. Large-scale manufacturing also rebounded, posting 5.8% growth between July and January FY2026, reversing a 1.7% contraction in the same period last year.
Inflation trends showed significant improvement, with the average Consumer Price Index (CPI) falling from 23.4% in FY2024 to 4.5% in FY2025. During the first eight months of FY2026, inflation averaged 5.5%, marginally lower than 5.8% in the same period the previous year. The decline in inflation has been attributed to better supply conditions and effective economic management, easing cost-of-living pressures on households.
Fiscal performance also strengthened. The overall fiscal deficit was reduced to 5.4% of GDP in FY2025 from 6.8% in FY2024. During July–January FY2026, the fiscal deficit was contained at Rs64.7 billion, equivalent to 0.05% of GDP, a significant improvement over Rs2,070.9 billion (1.8% of GDP) during the same period last year. The primary surplus increased to Rs4,151.6 billion, or 3.2% of GDP, building on a consolidated surplus of 2.4% recorded in FY2025.
Public debt reached Rs80.52 trillion, equivalent to 70.7% of GDP, exceeding projections due to lower nominal GDP, which stood at Rs113.9 trillion against the expected Rs124.1 trillion. Interest payments for FY2025 were recorded at Rs8.89 trillion, lower than the budgeted Rs9.78 trillion, attributed to the cumulative 9.5 percentage point decline in the State Bank of Pakistan’s policy rate, improved fiscal balances, and buyback of high-cost debt. Debt growth has remained stable at around 13% over the last two fiscal years.
The Finance Ministry reiterated that while key indicators reflect improving economic conditions, risks persist from global energy price volatility and geopolitical developments. Measures such as high-level monitoring, demand management, and reinforced austerity are expected to help mitigate these risks. Overall, the report emphasizes moderate growth, reduced inflation, improved fiscal balances, and relative stability in the external sector, reflecting a cautiously optimistic economic outlook for Pakistan.
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