ISLAMABAD: The Ministry of Finance on Friday warned of persistent downside risks to the economy, particularly from geopolitical uncertainties and volatility in global commodity prices, while saying prudent macroeconomic management is expected to preserve stability.
In its monthly economic update, the ministry indicated that inflation may edge up to 6-7 per cent in February, compared with 5.8 per cent in the previous month. “Inflation is expected to remain within the range of 6-7 per cent in February,” the report said.
Economic activity is projected to maintain its upward trajectory in FY2026, supported by macroeconomic stability, easing inflationary pressures and an improved fiscal position. Accommodative monetary policy, continued fiscal consolidation and structural reforms are expected to reinforce business confidence and private sector activity.
The report also noted that the Bureau of Emigration and Overseas Employment registered 75,663 workers going abroad for employment in January 2026, a 19 per cent increase from 63,559 in January 2025.
Growth is likely to be driven by a rebound in large-scale manufacturing (LSM), improved remittances and resilient agricultural performance. The external sector is expected to remain manageable amid exchange rate stability and contained current account pressures.
The economy entered the third quarter of FY2026 with improved macroeconomic fundamentals. Exchange rate stability, sustained growth in workers’ remittances and rising IT exports have supported the external account. High-frequency indicators point to a pickup in output, while monetary easing has reduced borrowing costs across the economy.
The report noted that fiscal consolidation has strengthened, with surpluses in both the overall and primary balances. A sizeable portion of public debt was also retired ahead of schedule. In addition, a Rs38 billion Ramazan Relief Package has been introduced to support vulnerable segments.
On the inflation front, consumer price inflation stood at 5.8 per cent year-on-year (YoY) in January 2026, compared with 5.6 per cent in the previous month and 2.4 per cent in January 2025. On average, inflation during July-January FY2026 was 5.2 per cent, compared with 6.5 per cent in the same period last year.
During July-December FY2026, the overall fiscal balance posted a surplus of 0.4 per cent of GDP (Rs541.9 billion), compared with a deficit of 1.3 per cent of GDP (Rs1,537.9 billion) in the corresponding period last year. The primary surplus stood at Rs4,105.5 billion (3.2 per cent of GDP), up from Rs3,603.7 billion (3.2 per cent of GDP) a year earlier.
During July-January FY2026, FBR tax collection rose 10.5 per cent to Rs7,176.9 billion, driven by growth in both direct and indirect taxes, which increased by 11.1 per cent and 9.8 per cent, respectively. Within indirect taxes, sales tax, customs duties and federal excise duty grew by 10.3 per cent, 5.4 per cent and 15.2 per cent, respectively.
In the agricultural sector, wheat for the Rabi 2025-26 season has been sown on around 23.1 million acres against a target of 23.8 million acres, with production targeted at 29.7 million tonnes. Imports of agricultural machinery and implements increased by 10.5 per cent to $76.8 million during July-January FY2026, compared with $69.5 million a year earlier. During Rabi 2025-26 (October-January), urea offtake rose to 2,744 thousand tonnes, 12 per cent higher than the same period last year, while DAP offtake stood at 583 thousand tonnes.
