ISLAMABAD: The Economic and Social Commission for Asia and the Pacific (ESCAP) on Wednesday launched its report, ‘Socioeconomic Prosperity amid the Transition to an Environmentally Sustainable Economy’, projecting Pakistan’s economic growth at 2.6 per cent for the outgoing fiscal year (FY26) and 3.1 per cent for FY27.
The findings were presented at a ceremony organised by the Sustainable Development Policy Institute (SDPI). Pakistan’s Economic Adviser Dr Hassan Mohsin questioned the projections, saying provisional GDP growth in the first half of the current fiscal year stood at 3.9 per cent, while large-scale manufacturing (LSM) had shown a strong recovery. He said the report’s estimates appeared overly conservative relative to current trends.
In the report, ESCAP said Pakistan had reached a staff-level agreement with the International Monetary Fund (IMF) for a $1.2 billion disbursement under the Extended Fund Facility and the Resilience and Sustainability Facility, aimed at supporting stabilisation and climate resilience policies. This would bring total IMF disbursements to about $3.3 billion.
ESCAP noted that Pakistan and Sri Lanka recorded growth of 3.0 per cent and 4.6 per cent, respectively. It also highlighted the impact of floods in Pakistan in June 2025, which claimed hundreds of lives, displaced millions and caused widespread damage to crops, homes and infrastructure. Inflation rose in the aftermath, although large-scale manufacturing maintained relatively strong performance.
The report said inflation in Pakistan fell from 23.8 per cent in 2024 to 4.6 per cent in 2025, reflecting the lagged impact of tight monetary policy, fiscal consolidation and improved crop supplies. However, the June 2025 floods led to renewed price pressures in the latter half of the year. Easing inflation has allowed several central banks in the region to loosen monetary policy in 2025, though the pace has varied depending on domestic conditions and financial stability concerns.
Fiscal consolidation efforts reduced Pakistan’s fiscal deficit to 3.2 per cent of GDP in FY2025, from 4.5 per cent a year earlier. ESCAP cautioned that such measures should consider their social impact, noting that reliance on indirect taxes can disproportionately affect lower-income groups, while cuts in public investment may hurt lower-skilled workers.
The report added that long-term government borrowing costs remain elevated in countries such as Pakistan and Sri Lanka, at around 12 per cent and 10.8 per cent, respectively.
It also highlighted a Sindh government initiative, launched in 2019 with World Bank support, to expand distributed solar power. The programme has installed systems in about 200,000 homes, benefiting roughly 1.5 million people and reducing reliance on kerosene in off-grid areas.
