Pakistan’s economic outlook has strengthened, with the State Bank of Pakistan (SBP) projecting real GDP growth between 3.75% and 4.75% for FY26, according to its latest Bi-Annual Monetary Policy Report. The central bank expects growth momentum to improve further in FY27 as macroeconomic stability deepens.
SBP noted that Pakistan is now in a stronger position to absorb external shocks, supported by improved fiscal discipline and stronger external buffers built over the past two years. Economic activity accelerated in Q1-FY26, with GDP growth rising to 3.7%, compared to 1.6% in the same quarter last year.
Both industry and agriculture rebounded, benefiting from stable production costs, easing financial conditions, and improved supply-side dynamics. Despite localized flood disruptions, agricultural recovery remained resilient.
Large-Scale Manufacturing (LSM) showed a broad-based recovery, led by automobiles, petroleum products, construction-linked industries, and high-value textile segments, signaling improving domestic demand and business confidence.
The report projects inflation to remain within the 5–7% target range through most of FY26 and FY27, despite short-term volatility. SBP attributed the recovery to coordinated monetary and fiscal policies, including easing financial conditions and a recent reduction in the Cash Reserve Requirement to 5%.
While flood-related risks have eased, SBP warned that global tariff uncertainties and commodity price volatility continue to pose challenges. Domestically, revenue shortfalls, climate risks, and losses in state-owned enterprises remain key vulnerabilities.
The central bank emphasized the need for structural reforms, export expansion, and privatization of loss-making SOEs to ensure sustainable long-term growth.