ISLAMABAD: With geopolitical tensions expected to ease following the US-Iran ceasefire, the Ministry of Finance has projected a further improvement in Pakistan’s economic outlook for FY2027, supported by continued reforms, stronger investor confidence and a more business-friendly environment.
The government has reduced petroleum prices by Rs74 per litre for petrol and Rs67 per litre for diesel following the decline in global crude oil prices. The Ministry of Finance said in its Monthly Economic Outlook report, released on Tuesday, that any further reduction in international oil prices would likely be passed on to domestic consumers, helping to ease inflationary pressures and support price stability.
Overall, with geopolitical risks receding, global energy prices moderating, inflationary pressures easing and external buffers improving, Pakistan’s economic outlook remains favourable, with growth expected to strengthen while maintaining macroeconomic stability.
“Inflation is anticipated to remain within the range of 11-12 per cent in June 2026,” the ministry said. The report said that, with macroeconomic stabilisation largely achieved, the economy is expected to maintain its growth momentum, supported by improving economic fundamentals, continued expansion in manufacturing, particularly large-scale manufacturing (LSM), a stable external account, improved fiscal discipline and the resilience of the agricultural sector.
The recent easing of geopolitical tensions, driven by ongoing peace efforts in the Middle East, has improved global market sentiment. As a result, international crude oil prices have retreated from recent highs, which is expected to reduce imported inflation and lower domestic fuel and transport costs.
Lower oil prices are also expected to support the external account by containing the country’s oil import bill. Domestically, prudent macroeconomic policies, continued fiscal consolidation and targeted support for productive sectors are expected to sustain economic growth while preserving stability.
The external sector outlook has strengthened further, supported by record workers’ remittances in May 2026 and continued growth in IT exports. These developments are expected to reinforce the balance of payments, support foreign exchange reserves and enhance resilience against external shocks, according to the report.
Pakistan’s economy is concluding FY2026 on a stronger footing, marked by improved macroeconomic stability and a sustained recovery in economic activity. Real GDP growth has reached 3.7 per cent, the highest level in four years, while the size of the economy has expanded to $452.1 billion.
Despite flood-related disruptions earlier in the year and subsequent volatility in global commodity markets, stabilisation gains were maintained. Growth remained broad-based across the agriculture, industry and services sectors, while average inflation stayed in single digits and within the target range.
Building on these gains, the government has unveiled the FY2026-27 budget with a strategic focus on export-led growth, taxpayer relief, enhanced social protection and fiscal discipline. The budget aims to consolidate macroeconomic stability while improving business competitiveness, encouraging investment, broadening the tax base, advancing energy sector reforms and creating conditions for stronger, more sustainable and inclusive growth.
Consumer Price Index (CPI) inflation stood at 11.7 per cent year-on-year (YoY) in May 2026, compared with 10.9 per cent in the previous month and 3.5 per cent in May 2025. On average, CPI inflation during July-May FY2026 was 6.7 per cent, compared with 4.6 per cent during the corresponding period last year.
The main contributors to YoY inflation were transport (36.8 per cent), housing, water, electricity, gas and fuels (16.8 per cent), non-perishable food items (9.4 per cent), clothing and footwear (8.8 per cent), education (8.4 per cent), health (7.5 per cent), restaurants and hotels (5.7 per cent), furnishings and household equipment maintenance (5.1 per cent), alcoholic beverages and tobacco (2.3 per cent), and communication (1.0 per cent). Prices declined in recreation and culture (0.2 per cent) and perishable food items (3.0 per cent).
The Sensitive Price Indicator (SPI) for the week ended June 18, 2026, rose by 0.5 per cent. During the week, prices of 25 out of 51 monitored items increased, 11 declined and 15 remained unchanged.
