ISLAMABAD: The Finance Ministry presented a report in the National Assembly on the government’s financial performance during the ongoing fiscal year, stating that key indicators reflect progress, including moderate GDP growth, a significant decline in inflation, improved fiscal balances, and relative stability in the external sector.
In a report submitted in response to a question from Dr Nafisa Shah, the Finance Ministry noted that risks remain from global commodity price fluctuations and geopolitical developments, particularly in the Middle East, which may create import pressures. The government has adopted a proactive approach to safeguard macroeconomic stability, with a high-level monitoring mechanism activated to closely track developments in global commodity markets, especially oil prices. Additionally, austerity measures have been reinforced across federal and provincial governments to contain non-essential expenditures and preserve fiscal space. The government is also maintaining adequate petroleum stocks, ensuring prudent demand management, and strengthening coordination among relevant ministries to mitigate potential spillovers on inflation and the external account. Overall, the outlook remains positive, with continued focus on sustaining macroeconomic stability and growth.
The Finance Ministry reported that Pakistan’s GDP recorded an annual growth of 3.09 percent in FY2025, while in the first quarter of FY2026, GDP growth is estimated at 3.71 percent, driven by growth of 2.89 percent in agriculture, 9.38 percent in industry, and 2.35 percent in services. Large-scale manufacturing (LSM) grew by 5.8 percent during July–January FY2026. The CPI inflation rate was recorded at 5.5 percent during July–February FY2025–26. The overall fiscal deficit reduced to 0.05 percent of GDP during July–January FY2026, while the primary surplus continued to improve, reaching Rs 4,151.6 billion (3.2 percent of GDP) during the same period.
On the debt front, public debt stood at 70.7 percent of GDP, with a nominal stock of PKR 80.52 trillion. Interest payments for FY2025 amounted to PKR 8.89 trillion, representing 7.8 percent of GDP. Prudent fiscal management is reflected in public debt numbers, which stood at Rs 81.3 trillion (62.8 percent of GDP) at the end of December 2025, compared to Rs 74.0 trillion (70.2 percent of GDP) during the same period last year.
Comparing economic indicators with the previous fiscal year, GDP growth improved to 3.09 percent in FY2025 from 2.60 percent in FY2024. The agriculture sector grew by 1.5 percent in FY2025 against 6.4 percent last year, the industrial sector recorded significant growth of 5.3 percent compared to a contraction of 0.9 percent last year, and the services sector grew by 3.1 percent, slightly higher than 2.25 percent in FY2024. In the first quarter of FY2026, GDP growth is estimated at 3.71 percent, compared to 1.56 percent in the first quarter of FY2025. Agriculture grew by 2.9 percent in the first quarter of FY2026 against 1.0 percent in the same period last year, while the industrial sector recorded a significant growth of 9.4 percent compared to 0.12 percent in the same period last year. This growth momentum was supported by expansion in construction and electricity, gas, and water supply.
Moreover, the large-scale manufacturing sector posted growth of 4.1 percent against a contraction of 0.9 percent during the same period last year. The services sector grew by 2.35 percent, slightly higher than 2.24 percent in the first quarter of FY2025, although growth in information and communications slowed. The LSM registered growth of 5.8 percent during July–January FY2026, compared to a contraction of 1.7 percent last year.
The average CPI inflation declined from 23.4 percent in FY2024 to 4.5 percent in FY2025, indicating reduced cost-of-living pressures due to better economic management and improved supply of goods. In the first eight months of FY2026, inflation stood at 5.5 percent, compared to 5.8 percent in the same period last year.
On the fiscal side, the government demonstrated a strong commitment to fiscal discipline, resulting in a consolidated primary surplus of 2.4 percent of GDP in FY2025, up from 0.9 percent in FY2024. The overall fiscal deficit reduced to 5.4 percent of GDP from 6.8 percent in FY2024. During July–January FY2026, the fiscal deficit was contained at Rs 64.7 billion (0.05 percent of GDP), compared to Rs 2,070.9 billion (1.8 percent of GDP) in the same period last year, while the primary surplus remained at 3.2 percent of GDP. Public debt-to-GDP ratio stood at 70.7 percent, exceeding the projected 64 percent for FY2025, primarily due to a lower-than-expected GDP outcome, with nominal GDP recorded at PKR 113.9 trillion compared to the projected PKR 124.1 trillion due to lower inflation during FY2025.
In nominal terms, public debt amounted to PKR 80.5 trillion, slightly above the projection of PKR 79.7 trillion for FY2025. The growth rate of public debt remained stable at 13 percent over the last two fiscal years. Interest expenditure totalled PKR 8.89 trillion, significantly below the budgeted amount of PKR 9.78 trillion, driven by a cumulative 9.5 percentage point decline in the State Bank of Pakistan’s policy rate during FY2025, the achievement of a consolidated primary surplus of 2.4 percent of GDP, and the buyback of high-cost debt securities. Overall, the economic situation has improved, with the economy showing signs of stabilisation and gradual recovery. Key indicators reflect this progress, including moderate GDP growth, a significant decline in inflation, improved fiscal balances, and relative stability in the external sector. Fiscal consolidation has reduced the fiscal deficit and generated primary surpluses, supporting debt sustainability. At the same time, recovery in industrial activity alongside steady performance in agriculture and services indicates a broad-based improvement in economic activity.
