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Aftab Maken
ISLAMABAD: Pakistan’s economy continued its positive momentum through the first half of FY2026, according to the latest Monthly Economic Update and Outlook released by the Finance Division’s Economic Adviser’s Wing.
The report highlights broad-based improvements, with real GDP growing 3.71% in Q1 FY2026, driven by strong industrial expansion of 9.38%, resilient agriculture growth of 2.89%, and services sector growth of 2.35%.
Large-Scale Manufacturing (LSM) maintained its upward trajectory, rising 5.02% during July-October FY2026, with notable gains in automobiles, cement, textiles, and food processing. Automobile production surged significantly, with cars up 65.1%, trucks and buses up 97.0%, and jeeps/pick-ups up 38.8%. Cement dispatches increased 11.5% to 21.4 million tonnes in July-November.
Agricultural support measures for the Rabi 2025-26 season are on track, with a wheat production target of 29.68 million tonnes. Agricultural credit disbursements rose 18.6% to Rs. 1,097.6 billion in July-November, while imports of machinery climbed 27.3%. Fertilizer offtake showed mixed results, with urea up 15.6% but DAP down 16.1% in October-November.
Inflation moderated slightly to 6.1% year-on-year in November 2025, down from 6.2% in October, though higher than 4.9% a year earlier. Key drivers included education (9.0%), health (8.3%), and non-perishable food items (7.3%). The State Bank of Pakistan (SBP) responded by cutting the policy rate by 50 basis points to 10.5% on December 15, reflecting well-anchored inflation expectations.
Fiscal management remained prudent, delivering a consolidated fiscal surplus of 1.0% of GDP in July-October FY2026 (up from 0.4% last year) and a primary surplus of 2.7%. Federal Board of Revenue (FBR) collections grew 10.2% to Rs. 4,734 billion in July-November, supported by gains across direct taxes, sales tax, excise, and customs.
On the external front, workers’ remittances rose 9.3% to $16.1 billion in July-November, providing a key cushion. However, the current account posted a deficit of $812 million over the same period, compared to a $503 million surplus last year, due to an 11.1% rise in imports to $25.6 billion amid recovering economic activity, while goods exports dipped 3.2% to $12.8 billion. Services exports, particularly IT, grew strongly by 18.5%. Foreign exchange reserves reached $21.0 billion as of December 19, the highest since March 2022, bolstered by $1.2 billion in IMF disbursements following a successful review.
The Pakistan Stock Exchange reflected renewed investor confidence, with the KSE-100 index surging 5,046 points in November to close the month strongly, pushing year-to-date gains significantly higher.
The outlook remains positive, with LSM expected to sustain recovery, inflation projected at 5.5-6.5% in December, and the current account within targeted ranges. Sustained remittances, IT exports, fiscal consolidation, and structural reforms are seen as key supports for macroeconomic stability and long-term growth.
Globally, the report notes moderating growth projections of 3.2% in 2025 per OECD, with risks from trade barriers and fiscal vulnerabilities, though near-term indicators show resilience.
