Economy Expected to Keep Gaining Momentum: Government Report
Positive Economic Outlook for Pakistan
The federal government has highlighted that Pakistan's economy is expected to maintain its positive momentum in the coming months. This optimism is driven by several factors, including industrial growth, improved governance, digitalization, and prudent macroeconomic management. The Ministry of Finance released its monthly Economic Update and Outlook in December 2025, emphasizing that the outlook for the economy remains positive. Sustained growth in industrial activity continues to be a key driver, with momentum in sectors such as textiles, automobiles, cement, and food processing.
The report also noted that the LSM (Industrial Production Index) is expected to maintain its recovery trajectory, supported by ongoing structural reforms aimed at enhancing industrial competitiveness. Inflation is projected to remain moderate, within the range of 5.5-6.5 percent in December, primarily due to the base effect. On the external front, the current account is expected to stay within the targeted range. Robust remittance inflows and steady performance in IT and services exports are likely to help cushion external pressures.
Fiscal consolidation is expected to continue supporting macroeconomic stability. Government efforts in expenditure management, enhanced tax collection, and structural reforms contribute to sustainable growth. Key high-frequency indicators have shown improvements, with the momentum driven by a broad-based recovery in industrial activity and resilience in the agriculture sector. During Q1 FY2025-26, GDP grew by 3.71 percent, with agriculture growing by 2.89 percent, industry by 9.38 percent, and the services sector by 2.35 percent.
Workers' remittances have maintained their upward trajectory, while foreign exchange reserves recorded their highest level since March 2022. Additionally, successful reviews with the IMF have enabled the government to receive $1.2 billion under the IMF Extended Fund Facility and Resilience and Sustainability Facility. These developments are providing immediate support to the economy and creating spillovers that could underpin long-term growth prospects.
Fiscal Management and Tax Collection
Prudent fiscal management has resulted in a fiscal surplus during the first four months of FY2026. With a 7.7 percent growth in gross federal receipts and a 4.8 percent decline in total expenditure, the government achieved a consolidated fiscal surplus of 1.0 percent of GDP during Jul-Oct FY2026, compared to 0.4 percent in the same period last year. A primary surplus of 2.7 percent of GDP was also recorded during this period, matching the previous year's figure.
During Jul-Nov FY2026, the Federal Board of Revenue (FBR) collected Rs. 4,734 billion, marking a 10.2 percent growth over the corresponding period last year. Direct tax collection increased by 10.5 percent, while sales tax, federal excise duty, and customs duty rose by 8.5 percent, 18.2 percent, and 10.1 percent, respectively.
Current Account and Trade Performance
In November 2025, the current account (CA) recorded a surplus of $100 million, but it posted a deficit of $812 million during Jul-Nov FY2026. During the same period last year, the CA recorded a surplus of $503 million. Export of goods declined by 3.2 percent to $12.8 billion, while imports increased by 11.1 percent to $25.6 billion, resulting in a trade deficit of $12.8 billion compared to $9.8 billion during the same period last year.
Remittances were up 9.3 percent to $16.1 billion, led by inflows from Saudi Arabia (24.2%) and UAE (20.8%). Net FDI inflows reached $927.4 million during Jul-Nov FY2026, with China ($308.4 million) and Hong Kong ($143.3 million) being the main sources. Power ($383.8 million) and financial services ($327.6 million) attracted the most FDI. Private and Public Foreign Portfolio Investment recorded net outflows of $192.2 million and $421.6 million, respectively.
As of December 19, 2025, foreign exchange reserves stood at $21.0 billion, including $15.9 billion with the State Bank of Pakistan (SBP). The Monetary Policy Committee reduced the policy rate by 50 bps to 10.5 percent, supported by sustainable economic growth and price stability.
Industrial Growth and Market Recovery
During Jul-Oct FY2026, LSM registered a growth of 5.02 percent, with 16 sectors recording positive growth, including textile, wearing apparel, non-metallic mineral products, food, coke and petroleum products, electrical equipment, automobile, and tobacco. In October 2025, LSM grew by 8.3 percent year-on-year (YoY) and 3.7 percent month-on-month (MoM).
The automobile sector performed robustly, with substantial increases in the production of cars (65.1%), trucks and buses (97.0%), and jeeps and pick-ups (38.8%). Cumulative cement dispatches reached 21.4 million tonnes, up 11.5 percent during Jul-Nov FY2026. Domestic dispatches totaled 17.4 million tonnes, with a 14.7 percent YoY increase, while exports remained nearly flat at 4.01 million tonnes.
The Pakistan Stock Exchange witnessed a strong recovery in November 2025, with the KSE-100 Index gaining 5,046 points, closing at 166,677. Market capitalization increased by Rs. 305 billion, reaching Rs. 18,866 billion by the end of the month.
Post a Comment