LAHORE: Economic, trade and investment policy uncertainty in Pakistan declined in September 2026, supported by the State Bank of Pakistan’s decision to maintain its policy rate, an increase in foreign exchange reserves and the Federal Board of Revenue’s achievement of its first-quarter revenue target, according to the latest policy uncertainty indices compiled by the Lahore School of Economics.
The report, prepared by Dr Azam Chaudhry, Professor, Dean of the Faculty of Economics and WTO Chair for Pakistan, and Dr Gul Andaman, Research Fellow at the Lahore School of Economics, was published in the school’s October newsletter.
The Economic Policy Uncertainty Index fell 24.21 per cent month-on-month to 162.46 in September. The Trade Policy Uncertainty Index declined 22.1 per cent to 192.89, while the Investment Policy Uncertainty Index dropped 6.45 per cent to 145.
Despite improvement, uncertainty persisted over fuel pricing, fiscal pressures, trade reforms and the government’s unfinished automobile policy, indicating that the decline in the indices had not eliminated key economic risks.
According to the report, the SBP kept its policy rate unchanged at 11.5 per cent, while foreign exchange reserves rose to $26.8 billion. The FBR met its revenue target for the first quarter of fiscal year 2026-27, although income tax collections fell short of the target.
However, discussions with the International Monetary Fund (IMF) remained stalled over fuel subsidies, gas-sector receivables and circular debt.
The daily fuel-pricing mechanism continued, while the petroleum levy remained high, fuelling concerns about its impact on consumers and fiscal policy.
Trade policy uncertainty also eased as Pakistan’s trade deficit narrowed in August and exports grew seven per cent year-on-year during July and August. Tariff rationalisation remained on track, including reductions in duties on imported mobile phones.
The report, however, identified continued disruption to shipping through the Strait of Hormuz and the unresolved Auto Industry Development and Export Policy 2026-31 as sources of uncertainty. The auto policy remained unfinalised and under IMF review, while Brent crude prices were reported above $100 per barrel.
Investment policy uncertainty declined amid progress on the privatisation of power distribution companies (DISCOs) and Pakistan’s record $3 billion Eurobond issuance. These developments helped ease regulatory and financial uncertainty.
Nevertheless, rising inflation and international commodity prices continued to exert pressure.
The report noted that inflation had increased to 11.1 per cent, while concerns over circular debt, fuel subsidies and possible changes to the petroleum levy continued to weigh on fiscal policy.
The newsletter also reported a decline in regulatory uncertainty as DISCO privatisation advanced despite concerns raised in the Senate, while a revised draft of the telecom bill was prepared.
Financial uncertainty, however, increased as the Pakistan Stock Exchange fell around four per cent amid concerns over oil prices and tensions between the United States and Iran.
