Pakistan economy grows 3.7pc in FY26 — fastest in four years, but short of target

Pakistan’s economy expanded by 3.7% in fiscal year 2026, marking the highest growth rate in four years but falling short of the government’s 4.2% target. Finance Minister Muhammad Aurangzeb presented the economic survey in Islamabad, attributing the growth to macroeconomic management, reforms under the IMF Extended Fund Facility (EFF), and stability in the exchange rate. Despite challenges like floods in August-September 2025 and a regional conflict in March 2026, the economy showed resilience, with agriculture growing 2.89%—despite flood damage—and large-scale manufacturing rebounding by 6.1%. The industrial sector grew 3.51%, led by a recovery in mining and quarrying, though electricity, gas, and water supply industries contracted due to reduced subsidies and slower output. The construction sector expanded by 5.73%, supporting overall industrial performance. Services sector growth reached 4.09%, contributing to the broader economic momentum. The fiscal deficit narrowed significantly to 0.7% of GDP (July-March FY26), down from 2.6% in the same period last year, while the primary surplus strengthened to 3.2% of GDP. Inflation averaged 6.2% (July-April FY26), and per capita income increased to $1,901 from $1,751 in FY2025. Workers’ remittances hit $30.3 billion, providing critical foreign exchange support. Aurangzeb highlighted that Pakistan’s economy reached a historic size of Rs126.9 trillion, despite global growth slowing to 3.1% due to geopolitical tensions. He emphasized that the government’s disciplined approach and reforms had steered the economy toward stabilization and growth, though external shocks like the Middle East conflict impacted the growth outlook.