As Pakistan heads into Budget 2026–27, the latest Economic Survey 2025–26 sets backdrop for what has been challenging year for economy of around 250 million people. Growth came in slightly below target, but key indicators like remittances, manufacturing, and foreign reserves showed resilience amid floods, global uncertainty, and regional tensions.
Now, all eyes shift to the budget, where the government will try to balance recovery, reforms, and rising expectations for stronger growth ahead. Pakistan’s economy expanded by 3.7% during FY2025-26, falling short of the government’s 4.2% growth target announced in the previous budget. The Economic Survey described the year as one of gradual stabilisation under the IMF programme despite multiple domestic and international pressures. Finance Minister Muhammad Aurangzeb said floods, global trade uncertainty, and regional tensions negatively affected economic momentum during the fiscal year.
According to the survey, Pakistan’s economy reached a record size of PKR 126.9 trillion, equivalent to around $452.1 billion. Per capita income also increased by 9% year-on-year to $1,901, reflecting a gradual recovery in income levels alongside economic growth.
The services sector continued to anchor Pakistan’s economy, recording 4.1% growth — the highest in four years. The sector now contributes nearly 58% of the country’s GDP. Industrial output also improved by 3.5%, mainly supported by construction activity and manufacturing recovery.
Large-scale manufacturing (LSM) grew by 6.1% during FY26. The government said growth was observed in 16 out of 22 industrial sectors, including textiles, food processing, and wearing apparel. Officials described the improvement as broad-based compared to previous years of industrial slowdown.
The agriculture sector expanded by 2.9% even though parts of the country experienced flood-related disruptions during the year. The government highlighted this performance as a sign of resilience in the rural economy despite climate-related challenges.
Pakistan’s fiscal position improved notably during the outgoing fiscal year. The fiscal deficit narrowed to 0.7% of GDP during July–March FY26 compared to 2.6% during the same period last year. At the same time, the primary surplus rose to 3.2% of GDP. The survey said tighter fiscal discipline was helping strengthen overall economic fundamentals.
Remittance inflows remained a major support for Pakistan’s economy, rising 9% year-on-year to $33.9 billion during July–April FY26. The finance minister praised overseas Pakistanis for their role in maintaining economic stability and supporting the country’s external financing position.
Pakistan’s exports declined overall during FY26, mainly because of reduced food exports. Rice exports fell by around $1.1 billion, while sugar exports declined by roughly $400 million after an exceptional increase in the previous year. Together, these reductions caused food-sector exports to shrink by approximately $1.5 billion. However, textile exports showed improvement during the year.
The technology sector remained one of the strongest-performing segments of the economy. IT exports crossed $3.8 billion during July–April FY26 and are expected to exceed $4.5 billion by the end of the fiscal year. Freelancer earnings also rose sharply from $642 million in FY25 to $959 million in FY26, reflecting the rapid expansion of Pakistan’s digital economy.
Pakistan’s foreign exchange reserves stood at $17.2 billion by May 29, 2026, marking a 49% increase compared to the previous year. The government expects reserves to touch $18 billion by the end of June, which would provide import cover for approximately three months — an internationally recognised benchmark for external stability.
Inflation accelerated during April 2026 as rising international oil prices and supply disruptions linked to tensions in the Middle East increased pressure on domestic prices. Inflation rose from 7.3% in March to 10.9% in April. Despite this increase, average inflation for July–May FY26 remained at 6.7%.
Pakistan’s debt-to-GDP ratio declined to 68.5% during FY26. According to the survey, this indicated gradual improvement in debt sustainability as the overall debt burden on the economy continued to ease.
Investment through Roshan Digital Accounts (RDA) reached $12.7 billion during FY26, highlighting continued participation by overseas Pakistanis in the country’s financial system and investment market.
The Pakistan Stock Exchange witnessed renewed corporate confidence during FY26, with 11 companies launching initial public offerings (IPOs). This was the highest number of IPO listings recorded in the last two decades.
The government announced plans to privatise three electricity distribution companies (DISCOs) before the end of the fiscal year. Officials see privatisation as part of broader economic reforms aimed at improving efficiency and reducing financial losses in the power sector.
The survey warned that ongoing conflict in the Middle East poses significant risks to both the global economy and emerging markets such as Pakistan. Disruptions in energy supply routes, rising uncertainty in oil markets, elevated global debt, and trade tensions were identified as major downside risks to future growth.
The National Economic Council approved a Rs3.669 trillion national development outlay for FY2026-27, including Rs838 billion in foreign assistance. NEC simultaneously approved revised allocations for FY2025-26 and formally endorsed the revised GDP growth estimate of 3.7%.
Economic Survey for FY-2025-26: Pakistan records 3.7% GDP growth despite shocks
