ISLAMABAD: Without citing uptake or disclosing exact growth figures, the Ministry of Finance has said Pakistan’s economy is well positioned to sustain its growth momentum in FY2026, supported by an encouraging performance in large-scale manufacturing (LSM) and other high-frequency indicators.
The ministry on Tuesday released its ‘Monthly Economic Outlook’ for January 2026, but did not specify a GDP growth target. The National Economic Council (NEC) had earlier approved a growth rate of 4.2 per cent, which was later revised downward in consultation with the International Monetary Fund (IMF) following floods.
While the State Bank of Pakistan (SBP) has indicated a possible GDP growth range of 3.75 per cent to 4.75 per cent for FY26 — compared with the IMF’s projection of 3.2 percent for the current fiscal year — sources said the Ministry of Finance has revised its own outlook upwards after the economy recorded growth of 3.71 per cent in the first quarter (July-September) of the ongoing fiscal year. Improved performance in agriculture and a turnaround in LSM from contraction to expansion have bolstered confidence among policymakers that GDP growth could approach 4.0 per cent in FY2025-26.
According to the ministry, the positive trajectory reflects the impact of prudent policies, ongoing structural reforms and easing monetary conditions amid subsiding inflationary pressures. “Inflation is expected to remain within the range of 5-6 per cent in January,” it said.
On the external front, the current account is projected to remain in deficit, though robust remittance inflows and steady growth in IT and services exports are expected to cushion pressures. Improved fiscal management is also expected to continue supporting macroeconomic stability, the ministry added.
The current account recorded a deficit of $1.2 billion during July-December FY2026, compared with a surplus of $0.96 billion in the same period last year. Goods and services exports stood at $20.3 billion, marginally lower than $20.4 billion a year earlier, with goods exports accounting for $15.5 billion. Services exports were driven largely by IT services, which rose 19.8 per cent to $2.2 billion. Goods and services imports increased to $37.8 billion from $33.5 billion, including goods imports of $31.3 billion, widening the trade deficit to $17.6 billion from $13.1 billion last year.
The report said the economy completed the first half of FY2026 with continued macroeconomic stability, reflected in contained inflation, a rebound in LSM growth, strengthened foreign exchange reserves and a stable exchange rate.
Sustained growth momentum has been accompanied by fiscal discipline, resulting in fiscal and primary surpluses. LSM has gained traction, signalling improved growth prospects for the remainder of the fiscal year. Remittances remained strong, supporting the external account, while the Pakistan Stock Exchange continued its rally, ranking among the world’s top-performing markets and reflecting improved investor sentiment. Building on these gains, the government has launched economic governance reforms aimed at institutionalising stability and enabling sustainable, private sector-led growth.
The agriculture sector remained resilient, supported by improved input demand. It recorded growth of 2.9 per cent in the first quarter of FY2026, up from 1.0 per cent a year earlier. Important crops (excluding wheat, a Rabi crop) contracted by 0.7 per cent, compared with a contraction of 13.1 percent in the same period last year, mainly due to a 1.2 per cent decline in cotton production. Other crops also contracted by 6.4 per cent, compared with a 19.3 per cent contraction last year, largely due to lower green fodder output, despite a 13 per cent increase in fertiliser use. Livestock posted strong growth of 6.3 per cent.
LSM grew by 6.0 per cent, with the Quantum Index of Manufacturing (QIM) reaching its highest level for July-November FY2026 since FY2016. Sixteen sectors recorded positive growth, including textiles, wearing apparel, non-metallic mineral products, food and beverages, coke and petroleum products, electrical equipment, automobiles and tobacco. In November 2025, LSM rose 10.4 per cent year-on-year (YoY) and 0.2 per cent month-on-month (MoM). Automobiles, coke and petroleum products, and wearing apparel were the largest contributors, with contributions of 1.8 per cent, 1.3 per cent and 1.2 per cent respectively. During July-December FY2026, automobile production rose sharply, with car output increasing by 56.1 per cent.
Consumer price inflation stood at 5.6 per cent YoY in December 2025, down from 6.1 per cent in November, compared with 4.1 per cent in December 2024. Average inflation during July-December FY2026 was 5.2 per cent, compared with 7.2 per cent a year earlier. Major contributors included education (9.9 per cent), health (7.7 per cent), non-perishable food items (7.5 per cent), housing, water, electricity, gas and fuels (6.9 per cent), clothing and footwear (6.2 per cent), restaurants and hotels (5.6 per cent) and transport (4.9 per cent). Prices declined in perishable food items (20.1 per cent) and recreation and culture (4.3 per cent). The Sensitive Price Indicator fell by 0.48 per cent in the week ending January 22, 2026.
In December 2025, the Bureau of Emigration and Overseas Employment registered 76,207 workers, an increase of 18.7 per cent from 64,195 a year earlier. During calendar year 2025, a total of 762,499 workers were registered, up 5.1 per cent from 725,672 in 2024.
