Finance Minister Muhammad Aurangzeb claimed that Pakistan's economy performed well despite internal and external challenges in the outgoing fiscal year 2025-26, even as targets for economic growth, inflation control, and savings and investment rates were missed.
Addressing the launching ceremony of the Economic Survey 2025-26 alongside Planning Minister Ahsan Iqbal, Information Minister Attaullah Tarar, and Minister of State for Finance Bilal Azhar Kayani, Aurangzeb noted that the economy faced uncertainty at the start of the fiscal year due to US tariffs and monsoon rains that affected economic activity.
Fiscal Arrangements and IMF Talks
The finance minister said that the arrangement between the federal government and provinces might continue for more than one year, as three provinces agreed to freeze their annual development plans and provide Rs920 billion as a grant to the federation. Regarding the International Monetary Fund (IMF) agreement on budgetary targets, he stated that discussions were progressing positively.
GDP Growth and Economic Indicators
The Economic Survey projected Pakistan's GDP growth at 3.7 percent for the outgoing fiscal year, below the target of 4.2 percent. However, this growth is higher than in the previous four years: -0.2 percent in FY2023, 2.6 percent in FY2024, and 3.2 percent in FY2025. The minister attributed the shortfall to multiple factors, including US tariffs, floods in August and September 2025, and regional conflict in March 2026.
Despite these challenges, the size of Pakistan's economy reached $452.1 billion, and per capita annual income increased from $1,751 to $1,901. The exchange rate remained stable at 280.65 Rs/USD compared to 279.35 Rs/USD in FY2025.
Sectoral Performance
Large-Scale Manufacturing (LSM) registered growth of 6.1 percent, cement demand increased by 10 percent, the services sector grew by 4.9 percent, and information and communication services recorded growth of 7.5 percent. The budget deficit was recorded at 0.7 percent of GDP during the first nine months, with a primary surplus of 3.2 percent. Interest payments reduced by 23 percent, and FBR tax collection rose by 10 percent.
The current account recorded a surplus of $72 million due to higher remittances, which reached $33.9 billion during July-March 2025-26. In April 2026, remittances hit a record $4.3 billion in a single month. Exports shrank by $1.5 billion, primarily due to a $1.1 billion decline in rice exports and $403 million in sugar exports, though textile exports increased. Sports goods exports grew by 18 percent, with footballs for the FIFA World Cup manufactured in Pakistan. IT exports crossed $3.8 billion, aiming for $4.5 billion.
Foreign Reserves and Debt
Foreign exchange reserves are projected to reach $18 billion by end-June 2026, providing three months of export cover. The debt-to-GDP ratio fell to 68.5 percent, indicating a gradual decline in the debt burden relative to the economy.
Digital Initiatives and Revenue
The government introduced digital production monitoring in sugar and cement sectors, generating Rs60 billion in additional revenue. AI-based audit selection yielded an extra Rs34 billion. The number of merchants using digital payments is close to 1.7 million, targeting 2 million by June 2026, while digital banking users reached 133 million, exceeding the target of 120 million.
External Shocks and Outlook
Aurangzeb noted that the government successfully managed the first-order impact of the Middle East conflict, but second-order effects are being felt through rising inflation and policy rate increases. He expressed optimism about mediation efforts but acknowledged damage to energy infrastructure.
The Pakistan Stock Exchange's investor base surpassed 563,000, with 11 new companies listed this year. Over 39,000 new companies were registered, bringing the total to over 297,000. Private sector credit increased by Rs934 billion, and agricultural financing reached Rs2.162 trillion. Privatization of PIA is encouraging, with local investors purchasing it, and investment has been made in the 5G spectrum programme.
Planning Minister Ahsan Iqbal stressed that sustainable economic growth depends on policy continuity and political stability. Rashid Mahmood Langrial reported that revenue collection increased from $32.6 billion in June 2024 to $46.4 billion in June 2026, a 46 percent growth over two years.
Agriculture
The agriculture sector grew by 2.89 percent in FY2026, up from 1.53 percent previously, despite floods. Important crops showed modest growth: wheat (+4.3%), rice (+2.80%), sugarcane (+6.20%), while maize (-2.68%) and cotton (-0.5%) declined. Other crops grew by 2.43%, with high growth in gram (50.4%), potato (27.6%), mangoes (11.6%), banana (30.8%), turmeric (25.1%), and chillies (9.2%). Livestock increased by 3.75%, forestry by 2.02%, and fishing by 1.66%.
Services
The services sector grew by 4.09 percent, the highest in four years, driven by wholesale and retail trade (3.71%), transport and storage (2.31%), information and communication (7.52%), public administration (8.54%), education (5.23%), health (6.85%), and other private services (3.69%).
Industry
Industry grew by 3.51 percent. Mining and quarrying posted modest growth of 0.38% due to declines in natural gas and crude oil, while LSM grew by 6.11% with strong performance in automobiles (61.66%), transport equipment (39.93%), and food (9.77%). Electricity, gas and water supply contracted by 10.63% due to a high base effect, while construction grew by 5.73%.
Inflation
CPI inflation for July-April FY2026 was 6.2 percent, compared to 4.7 percent in the same period last year. Inflation remained broadly stable in the first three quarters but became vulnerable to renewed price pressures due to geopolitical tensions.
