KARACHI – Pakistan’s economic outlook is showing signs of improvement as State Bank of Pakistan (SBP) highlighted recovery in economic activity, stronger external buffers, and improved fiscal indicators in its latest monetary policy assessment.
The central bank said while economic activity slowed in final quarter of FY26 due to Middle East tensions, rising global energy prices, and government austerity measures, several high-frequency indicators pointed toward a rebound in June.
According to the SBP, indicators including automobile sales, cement dispatches, fertilizer offtake, satellite data, and business sentiment suggested renewed momentum in economic activity. The agriculture outlook has also improved, with higher expected sugarcane production likely to offset weaker cotton output.
Monetary Policy Committee projected real GDP growth between 3.5% and 4.5% for FY27, supported by budgetary incentives, import tariff rationalization, and improved private sector credit flows. However, the central bank warned that global commodity price volatility, renewed geopolitical tensions, and uncertain weather conditions could pose risks to growth.
On the external front, Pakistan’s foreign exchange position strengthened, with SBP reserves benefiting from continued foreign exchange purchases and official inflows. The country’s current account deficit remained limited at $139 million in FY26, helped by record workers’ remittances that partially offset the widening trade gap.
The central bank further highlighted fiscal improvements, noting that the Federal Board of Revenue (FBR) achieved its revised tax collection target of Rs13 trillion for FY26, while the primary balance remained in surplus for the third consecutive year.
Meanwhile, private sector borrowing gained momentum, with credit growth accelerating to 14.9%, driven by financing in sectors including textiles, telecommunications, wholesale, and retail trade.
Despite improvements, the SBP cautioned that inflationary pressures remain a challenge. Headline inflation eased to 11.1% in June, while core inflation declined to 8.4%, but rising food prices, global commodity costs, and energy-related risks could keep inflation elevated in the near term.
The central bank expects inflation to gradually decline and move toward the 5–7% target range by June 2027, provided economic stability and reform efforts continue.
State Bank Monetary Policy decision keeps policy rate steady at 11.5% amid global uncertainty
