Pakistan’s economy expanded by 3.7 percent in FY2025-26, marking its fastest growth rate in four years, according to the Pakistan Economic Survey released by Finance Minister Muhammad Aurangzeb on Thursday.
While the growth rate exceeded last year’s 3.18 percent, it remained below the government’s target of 4.2 percent for the fiscal year.
Presenting the survey in Islamabad, Aurangzeb described the year as one of resilience amid multiple economic and geopolitical challenges, including global trade uncertainty, floods in 2025, and regional tensions in 2026.
Despite missing the official target, the government highlighted significant improvements across key sectors of the economy. Pakistan’s GDP reached a record size of Rs. 126.9 trillion, while per capita income increased to $1,901 from $1,751 a year earlier.
The agriculture sector recorded growth of 2.89 percent, nearly double last year’s 1.53 percent, despite weather-related disruptions. The livestock sector remained a key contributor, while crop production returned to positive growth.
Large-Scale Manufacturing (LSM) emerged as one of the strongest performers, expanding by 6.1 percent the highest growth in four years. Positive growth was recorded in 16 out of 22 manufacturing sub-sectors, supported by rising demand for cement, fertilizers, petroleum products, automobiles, and mobile phones.
The services sector, which accounts for nearly 58 percent of Pakistan’s economy, grew by 4.09 percent. Communication and information services led the expansion with growth of 7.52 percent, reflecting increasing activity in the country’s digital economy.
On the fiscal front, Pakistan significantly reduced its budget deficit. The fiscal deficit narrowed to 0.7 percent of GDP compared to 2.6 percent a year earlier, while the primary surplus improved to 3.2 percent of GDP.
Tax revenues increased by over 10 percent, while debt servicing costs declined by 23 percent, creating additional fiscal space for the government.
Inflation remained relatively contained during most of the fiscal year, although recent geopolitical developments triggered renewed price pressures. Consumer inflation averaged 6.2 percent during July-April FY26.
The external sector presented mixed results. Workers’ remittances increased by 8.2 percent to $30.3 billion during the first nine months of the fiscal year, helping maintain a current account surplus of $72 million.
However, exports remained under pressure, particularly in the food sector. Rice exports declined by $1.1 billion, while sugar exports fell by $403 million. In contrast, textile exports, sports goods, and IT exports showed strong growth.
Pakistan’s IT exports surpassed $3.8 billion during FY26 and are expected to reach $4.5 billion by year-end, highlighting the growing importance of the digital economy.
The government expects foreign exchange reserves to approach $18 billion by the end of June, strengthening external stability and providing nearly three months of import cover.
The Economic Survey will serve as the foundation for Budget 2026-27, which aims to build on macroeconomic stabilization while accelerating growth, exports, and investment.
