GDP Recovery Holds Despite Major Pressures
Pakistan’s economy showed resilience in fiscal year 2026, recording GDP growth of 3.70 percent compared with 3.18 percent last year, according to the Pakistan Economic Survey 2025-26.
The recovery came despite major challenges, including devastating monsoon floods and rising global uncertainty linked to the Middle East conflict.
The survey said growth was supported by steady performance across agriculture, industry and services. It described the recovery as a sign of renewed economic confidence after years of pressure.
The agriculture sector grew by 2.89 percent, up from 1.53 percent in the previous year. This improvement came despite the 2025 monsoon floods, which caused estimated damage of Rs822 billion, mainly in Punjab.
Cotton and maize output declined during the year. However, strong wheat and sugarcane harvests helped reduce the overall impact on agricultural growth.
Services and Industry Drive Economic Momentum
The services sector remained the strongest pillar of the economy. It expanded by 4.09 percent and continued to provide stability to overall growth.
Information and communication posted strong annual growth of 7.52 percent. Wholesale and retail trade also increased by 3.71 percent, reflecting improved commercial activity.
The industrial sector grew by 3.51 percent after facing pressure in previous years. Large-scale manufacturing rebounded by 6.5 percent, helping revive confidence in the production sector.
The survey also highlighted improvement in fiscal management. The fiscal deficit narrowed to 0.7 percent of GDP during the first nine months of FY2026, down from 2.6 percent during the same period last year.
This improvement was linked to higher tax and non-tax revenues, along with lower interest payments as borrowing costs began to ease.
Pakistan also recorded a current account surplus of $72 million during July-March. Workers’ remittances rose by 8.2 percent to reach $30.3 billion.
Foreign exchange reserves strengthened to $21.8 billion by the end of March 2026. The exchange rate remained stable at an average of Rs281.1 per US dollar.
Inflation and Oil Prices Remain Key Risks
Despite economic recovery, inflation remained a serious challenge.
Average CPI inflation stood at 6.2 percent during July-April FY2026, compared with 4.7 percent last year. Inflation jumped to 10.9 percent in April 2026 after energy prices surged.
The Middle East conflict created a major external shock for Pakistan. Global Brent crude prices rose sharply from $62.7 per barrel in December 2025 to $103.7 per barrel in March 2026.
By April 2026, oil prices reached $120.4 per barrel, creating pressure on fuel costs, transport expenses and industrial production.
Pakistan’s petroleum import bill reached $8.9 billion during July-March FY2026. Higher fuel prices also affected household purchasing power and business margins.
To protect vulnerable groups, the government introduced targeted subsidies for two-wheelers, public transport and freight vehicles. It also established the Prime Minister’s Austerity Fund 2026.
The State Bank of Pakistan raised the policy rate to 11.5 percent in April 2026 to control inflation expectations.
Looking ahead, the survey said FY2027 will depend heavily on global conditions, energy prices and the pace of reforms.
The government is focusing on pension reforms, austerity measures and rightsizing of federal entities to support durable growth.
Pakistan’s recovery has gained momentum, but the outlook remains exposed to oil shocks, inflation pressure and international financial uncertainty.
