Pakistan’s economy is showing signs of a broader recovery as the State Bank of Pakistan (SBP) raised its GDP growth forecast for FY26 to a range of 3.75–4.75%, signaling optimism across multiple sectors despite external pressures and earlier IMF projections. The central bank governor, Jameel Ahmad, noted that this upward revision, decided during the January policy meeting, reflects stronger domestic demand, resilient agricultural output, and improved performance in manufacturing, even following last year’s devastating floods.
Governor Ahmad emphasized that differences between the SBP’s projections and those of the International Monetary Fund were largely due to timing variations and the IMF’s inclusion of flood-related effects. First-quarter fiscal data, alongside high-frequency economic indicators, point to gains across agriculture, industry, and services, suggesting the recovery is not limited to export activity alone. The IMF had projected GDP growth at approximately 3.6% for FY26 in its June World Economic Outlook update, while revising FY25 growth upward to about 2.7%.
Financial conditions in Pakistan have eased substantially following a cumulative 1,150 basis-point reduction in the policy rate since June 2024, although the central bank maintained its benchmark rate at 10.5% last month. Governor Ahmad indicated that this easing supports economic expansion while maintaining price stability, a critical factor as Pakistan consolidates progress under the $7 billion IMF program after emerging from a balance-of-payments crisis.
Large-scale manufacturing data between July and November show roughly 6% growth, driven primarily by automobiles, petroleum products, garments, cement, food, and textiles. These sectors contributed significantly to cumulative growth of 6.01%, while pharmaceuticals and iron and steel weighed slightly on overall output. The manufacturing sector’s performance points to strengthening domestic demand, particularly in construction-related industries, which has helped sustain broader economic momentum.
While exports fell in the first half of the fiscal year, the decline was mainly attributed to lower global prices and temporary border disruptions, rather than domestic economic weakness. On external accounts, the SBP expects the current account deficit to remain within 0–1% of GDP, supported by steady remittance inflows that help maintain foreign exchange reserves above program targets. Additional remittances are anticipated around the Eid festival period.
Pakistan is also advancing plans to issue yuan-denominated panda bonds in China’s domestic market, marking an effort to diversify external financing and expand the investor base. Preparations for “Panda Series II” issuances are underway, with Chinese regulators informed of the phased approach.
Governor Ahmad stressed that the SBP continues to actively purchase dollars in the interbank market to strengthen reserve buffers, publishing transaction data regularly. He also underlined the importance of ongoing structural reforms to ensure sustained long-term growth, reflecting the government’s commitment to supporting economic stability and investment confidence in Pakistan.
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