Islamabad:The national economy has posted its strongest showing in recent years, with real GDP growth reaching 3.7 percent in FY2026, marking a clear upward trajectory from 3.2 percent in FY25, 2.6 percent in FY24 and a contraction of 0.2 percent in FY23.
The sustained focus of Prime Minister Shehbaz Sharif’s government on macroeconomic stability, structural reforms and investor confidence has produced a broad-based recovery that is now visibly strengthening across all major sectors.
The country’s economy has reached a historic milestone, expanding to $452.1 billion, an 11 percent increase year-on-year, making it the largest economic size ever recorded in Pakistan’s history.
This expansion reflects robust momentum built on disciplined fiscal management and targeted policy interventions. Inflation, a persistent challenge in previous years, has been brought under control. Average CPI inflation stood at 6.7 percent during July-May FY26, significantly lower than the 23.4 percent recorded in FY24 and 29.2 percent in FY23.
Despite external pressures from the US-Iran conflict affecting energy prices, price stability has largely been preserved, providing much-needed relief to households and businesses alike. Per capita income has risen to $1,901, up nine percent from the previous year, signalling that the benefits of growth are beginning to reach ordinary citizens.
External buffers have also strengthened considerably. Foreign exchange reserves touched $17.2 billion by late May 2026, a 49 percent increase year-on-year. This has improved the import cover to 2.75 months, up from 1.77 months last year, enhancing the country’s resilience against global shocks.
Sectoral performance underscores the breadth of the recovery. Agriculture grew by 2.89 percent despite flood-related challenges, while the industrial sector expanded 3.51 percent, driven by a strong rebound in large-scale manufacturing which posted 6.1 percent growth, the highest in four years. Services, the mainstay of the economy, grew 4.09 percent, anchoring overall expansion.
Fiscal discipline has been a standout feature. The fiscal deficit was contained at just 0.7 percent of GDP during July-March, a dramatic improvement from eight percent in FY2022. A primary surplus of 3.2 percent of GDP further highlights prudent spending and revenue efforts. Debt-to-GDP ratio has declined to an estimated 68.5 percent in FY26 from 70.7 percent last year and around 75 percent in FY23, improving long-term debt sustainability.
Remittances from overseas Pakistanis reached $33.9 billion during July-May, on track to surpass $41 billion for the full year. IT and technology exports grew strongly, recording $3.8 billion in the first 10 months, with freelancers’ earnings surging 49 percent to nearly $1 billion. The Roshan Digital Account has accumulated $12.7 billion, reflecting continued trust from the diaspora.
Private sector confidence is surging. Private sector credit expanded by Rs934 billion in the first nine months, while agricultural credit rose 15 percent. Private investment grew 12.8 percent, while the equity market witnessed record participation with over 563,000 investors, a 45 percent increase. Eleven IPOs have been listed so far this year, the highest in two decades, while more than 39,000 new companies were registered, almost all digitally.
Social protection measures have been strengthened alongside growth. The Benazir Income Support Programme allocation rose 21 percent to Rs722.5 billion. Initiatives such as ‘Mera Ghar Mera Ashiana’, ‘Zarkheze’ and youth-focused programmes are expanding economic inclusion for underserved segments.
The government’s structural reform agenda, encompassing taxation, energy sector transformation, SOE privatisation, pension reforms, trade liberalisation and digital governance, is now firmly in implementation. These measures, initiated in FY24, are yielding measurable results in formalisation, efficiency and transparency.
Finance Ministry officials attribute the current performance to policy continuity and difficult yet necessary decisions. “Facts speak louder than words,” said a senior official, pointing to the data. “We are moving from stabilisation to sustainable growth.”
While challenges like global uncertainties and climate vulnerabilities remain, the trajectory is unmistakably positive. With improving fundamentals, rising investor confidence and a young, digitally savvy population, the country appears better positioned than it has been in years to translate this momentum into inclusive and durable prosperity. The federal government’s bold reforms have turned the corner, delivering not just numbers on a page but tangible hope for a stronger economic future.
