ISLAMABAD: The government on Friday highlighted that geopolitical uncertainty and global commodity price volatility pose downside risks to Pakistan’s otherwise improving economic growth prospects.
“Downside risks persist, particularly from geopolitical uncertainties and global commodity price volatility,” the Ministry of Finance (MoF) said in its February Economic Outlook. The ministry added that prudent macroeconomic management would help safeguard economic stability.
Inflation is projected at 6–7% for February, while overall economic activity is expected to continue its upward trajectory in FY26, supported by sustained macroeconomic stability, easing inflationary pressures, and an improved fiscal position. “Accommodative monetary policy, along with fiscal consolidation and structural reforms, is likely to strengthen business confidence and private sector activity,” the report noted.
Growth is expected to be driven by a rebound in large-scale manufacturing (LSM), stronger remittances, and resilient agricultural output. The external sector is projected to remain manageable, supported by a stable exchange rate and contained current account pressures.
According to the report, Pakistan entered the third quarter of FY26 with improved macroeconomic fundamentals. Exchange rate stability, sustained remittance inflows, and rising IT exports have collectively contributed to a balanced current account. Inflation has remained within target ranges, while monetary easing has lowered borrowing costs, improving overall financing conditions. Fiscal consolidation has strengthened, with both fiscal and primary balances in surplus.
The report also highlighted proactive debt management, noting that a significant portion of public debt was retired ahead of schedule. Social safety nets have been enhanced through initiatives like the Rs38 billion Ramazan Relief Package. “Overall, growth prospects have improved significantly, with momentum likely to strengthen in the remaining fiscal year, steering the economy toward sustainable growth,” the report said.
Agricultural output, particularly wheat production, is expected to remain strong despite slightly lower sowing. During the Rabi 2025–26 season, wheat was sown on around 23.1 million acres against a target of 23.8 million acres, aiming for a production target of 29.7 million tonnes. Government efforts to boost productivity—including access to quality seeds, agricultural credit, mechanisation, and fertiliser supply—have supported input availability. Imports of agricultural machinery rose 10.5% to $76.8 million during July–January FY26. Urea offtake increased by 12% to 2,744 thousand tonnes, while DAP reached 583 thousand tonnes.
The LSM sector showed robust growth of 4.8% during July–December FY26, up from 1.8% a year earlier, led by automobiles, wearing apparel, and coke and petroleum products, contributing 1.6%, 1.3%, and 1% respectively. Fourteen sectors—including textiles, food, beverages, electrical equipment, and tobacco—recorded positive growth, highlighting broad-based industrial momentum.