ISLAMABAD: The Ministry of Finance has warned that the ongoing conflict in the Middle East is posing new risks and increasing uncertainty for the macroeconomic outlook, amid rising energy costs, but said Pakistan’s economy appears better positioned than in previous episodes of external stress to manage these challenges.
Despite risks stemming from the conflict, including rising global commodity prices and potential supply chain disruptions, Pakistan’s external position is expected to remain stable, supported by higher remittance inflows and growth in IT exports, the ministry said.
“Amid ongoing supply chain constraints, inflation is anticipated to remain within the range of 8-9 per cent for April 2026,” the ministry said in its monthly economic outlook released on Thursday.
Despite prevailing geopolitical uncertainties, key macroeconomic indicators have remained stable, including sustained growth in large-scale manufacturing (LSM), with a broad-based recovery led by the automobile sector, alongside rising cement dispatches, pointing to improving domestic demand. Based on this momentum, economic activity is expected to remain firm.
Overall, the economy appears well positioned to sustain its growth trajectory, supported by strengthening macroeconomic fundamentals and timely policy responses to mitigate adverse impacts, the ministry added.
Pakistan’s economy completed the third quarter of FY2026 on a stable footing, underpinned by macroeconomic stability and gradually strengthening growth momentum. The manufacturing sector maintained its expansion, while the external account posted three consecutive monthly surpluses, driven by strong remittances and rising IT exports.
Inflation edged up but remained within the annual target. Prudent fiscal management supported continued improvement in the fiscal position. Timely Eurobond repayments, a successful IMF staff-level agreement, and Fitch’s B- rating with a stable outlook reinforced external credibility, reflecting ongoing reform efforts and a broadly positive economic direction.
Inflationary pressures increased but remained contained. Consumer price inflation was recorded at 7.3 per cent year-on-year (YoY) in March 2026, compared with 7.0 per cent in the previous month and 0.7 per cent in March 2025. On average, inflation stood at 5.7 per cent during July-March FY2026, compared with 5.3 per cent in the same period last year.
Major year-on-year contributors to inflation included transport (12.5 per cent), housing, water, electricity, gas and fuels (11.5 per cent), education (9.0 per cent), health (7.4 per cent), clothing and footwear (5.8 per cent), restaurants and hotels (5.1 per cent), non-perishable food items (5.0 per cent), and furnishing and household equipment maintenance (3.9 per cent). Alcoholic beverages and tobacco (2.3 per cent) and communication (0.8 per cent) also contributed,while declines were recorded in recreation and culture (4.1 per cent) and perishable food items (6.9 per cent).
The Sensitive Price Indicator (SPI) for the week ended April 23, 2026, fell by 0.3 per cent week-on-week (WoW). Of the 51 items monitored, prices of 19 increased, nine declined and 23 remained unchanged.
In March 2026, the current account posted a surplus of $1.1 billion, bringing the cumulative balance for July-March FY2026 to a surplus of $8 million. Goods and services exports stood at $30.6 billion, compared with $31 billion a year earlier, including goods exports of $23.3 billion.
Services exports were led by IT, which rose 19.8 per cent to $3.4 billion. Goods and services imports increased to $56.3 billion from $52 billion a year earlier, with goods imports at $46.8 billion. The overall trade deficit widened to $25.7 billion, compared with $21.0 billion last year.
Workers’ remittances remained a key support, rising 8.2 per cent to $30.3 billion from $28 billion, led by inflows from Saudi Arabia (23.4 per cent share) and the UAE (20.7 per cent). Net foreign direct investment (FDI) stood at $1.4 billion, with China ($678.6 million) and Hong Kong ($253.7 million) as the main sources. By sector, power ($714.2 million) and financial business ($588.7 million) attracted the highest inflows.
Private and public foreign portfolio investment (FPI) recorded net outflows of $550.3 million and $393.5 million, respectively. As of April 17, 2026, foreign exchange reserves stood at $20.6 billion, including $15.1 billion held by the State Bank of Pakistan.
