The country’s economy ended the financial year 2025-26 on a stronger footing, with real GDP growth accelerating to 3.7 percent-the highest in four years-and the economy expanding to $452.1 billion amid improving macroeconomic stability and a sustained recovery in economic activity, according to the Finance Ministry’s latest report on Tuesday.
“Despite early year flood-related disruptions and subsequent volatility in global commodity markets, stabilization gains were preserved, growth remained broad-based across agriculture, industry and services, and average inflation stayed in single digits within the target range,” says monthly Economic Update and Outlook for June 2026 released by the ministry here.
According to the report, fiscal performance also remained encouraging, underpinned by effective expenditure management, revenue mobilization and provincial surpluses, which helped narrow the fiscal deficit and achieved a primary surplus of 3.5 percent of GDP during Jul-Apr FY2026.
The external sector also remained stable, supported by sustained growth in remittances and IT exports, a broadly stable exchange rate, and improved foreign exchange reserves and import coverage. The current account recorded a surplus of $255 million during Jul-May FY2026, reflecting continued resilience in the external account.
Investor confidence also improved during the year, supported by the government’s continued commitment to the IMF-supported EFF and RSF programmes and reinforced by rating upgrades from Fitch and Moody’s.
These developments were reflected in Pakistan’s re-entry into international capital markets through issuance of Eurobond after four years, successful launching of Panda Bond, and strong performance of KSE-100 Index reaching an all time high and remained among the fastest growing markets in Asia.
Building on these gains, the government announced the Budget 2026-27 with a strategic focus on export-led growth, taxpayer relief, enhanced social protection and fiscal discipline.
During FY2026, agriculture sector registered a growth of 2.9 percent despite floods damages. The sector is envisaged to improve in FY2027 and targeted to grow by 3.6 percent, supported by growth of 3.9 percent in livestock, 3.5 percent in other crops, 2.9 percent in important crops, 1.7 percent in fisheries, and 1.5 percent in cotton ginning.
Large-Scale Manufacturing (LSM) witnessed a strong growth of 6.4 percent during Jul-Apr FY2026 against the contraction of 1.5 percent same period last year.
The Consumer Price Index (CPI) inflation is recorded at 11.7 percent on a YoY basis in May 2026 as compared to an increase of 10.9 percent in the previous month and 3.5 percent in May 2025. On average during Jul-May, FY2026, CPI inflation stood at 6.7 percent as against 4.6 percent during the same period last year.
Meanwhile, net federal revenue increased by 5.8 percent to Rs. 8,601.1 billion during Jul-Apr FY2026, supported by growth in both tax and non-tax revenues, which increased by 10.3 percent and 6.0 percent, respectively. During Jul-May FY2026, FBR’s tax collection grew by 9.7 percent and reached Rs. 11,228.8 billion.
Total expenditure during this period declined by 9.9 percent to Rs. 11,621.3 billion. The contraction was primarily driven by a 10.3 percent reduction in current expenditure, largely due to a significant decline in mark-up payments (21.9%).
With macroeconomic stabilization largely achieved, Pakistan’s economy is expected to maintain its growth momentum, supported by improving macroeconomic fundamentals, sustained expansion in manufacturing, especially LSM, a stable external account, improved fiscal discipline and continued resilience in the agriculture sector.
The recent easing of geopolitical tensions, due to the ongoing peace efforts in the Middle East, has improved global market sentiment.
Consequently, international crude oil prices have eased from their recent highs, which is expected to reduce imported inflationary pressures and help lower domestic fuel and transportation costs. Inflation is anticipated to remain within the range of 11-12 percent for June 2026. Lower international oil prices are also expected to support the external account by containing the oil import bill.
On the domestic front, prudent macroeconomic policies, continued fiscal consolidation, and targeted support for productive sectors are expected to sustain economic growth while preserving macroeconomic stability.