Pakistan’s economy entered Fiscal Year 2025-26 on a positive trajectory, supported by stronger external and fiscal positions, according to the Finance Ministry’s Monthly Update and Outlook for August 2025.
The report noted that Pakistan’s economic gains in FY2025 have carried forward into the new fiscal year, setting an optimistic tone. Easing inflation, accommodative monetary policy, and reforms encouraging private sector–led growth are expected to reinforce investor confidence.
Exports, Remittances, and Trade Outlook
A favourable global environment and the recently concluded Pakistan-U.S. trade deal are projected to boost exports, while robust workers’ remittances will help offset tariff-driven import pressures. However, the ministry cautioned that flood-related damages may pose fiscal challenges and disrupt food supplies in affected areas.
Inflation and Monetary Policy
Inflation is projected between 4-5% in August 2025. CPI inflation stood at 4.1% year-on-year in July 2025, compared to 11.1% in July 2024. On a month-to-month basis, inflation rose 2.9%, largely driven by energy price adjustments. The Monetary Policy Committee maintained the policy rate at 11% on July 30.
Fiscal and External Sector Performance
The fiscal deficit narrowed to 5.4% of GDP in FY2025, the lowest in eight years, while the primary surplus reached Rs. 2,719.4 billion (2.4% of GDP), the highest in 24 years. Revenue collection grew sharply, with tax revenues up 26.2% and non-tax revenues surging 65.7%.
In July 2025, the Federal Board of Revenue (FBR) collected Rs. 757.4 billion, reflecting a 14.8% increase. On the external front, the current account deficit stood at $254 million, lower than $348 million a year earlier. Exports rose 16.2% to $2.7 billion, while imports increased 11.8% to $5.4 billion.
Industrial and Agricultural Indicators
Large-Scale Manufacturing grew 4.1% year-on-year in June 2025, though it declined month-on-month by 3.7%. Agricultural credit disbursement rose 16.3% to Rs. 2,577.3 billion, while agricultural machinery imports surged by 123.9% in July 2025.
International Confidence
The Finance Ministry highlighted that sustained improvements in FY2025 prompted international rating agencies to upgrade Pakistan’s sovereign outlook, reflecting global confidence in the country’s reform efforts.
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