ISLAMABAD: The government expects inflationary pressures to ease in the new fiscal year after consumer inflation climbed to an estimated 12 per cent in June, citing lower global oil prices following the reopening of the Strait of Hormuz and improving geopolitical conditions in the Middle East.
In its Monthly Economic Update and Outlook (June 2026), the Ministry of Finance said Pakistan’s economic outlook for FY2027 was expected to improve further as tensions eased after the US-Iran ceasefire. It said reform continuity, stronger investor confidence and a more business-friendly environment would support economic growth.
The ministry noted that easing geopolitical tensions and ongoing peace efforts in the Middle East had improved global market sentiment. As a result, international crude oil prices had retreated from recent highs, a development expected to reduce imported inflation, lower domestic fuel and transport costs, and ease pressure on consumers.
It projected June inflation, measured by the Consumer Price Index (CPI), to remain within the range of 11pc to 12pc. The ministry added that lower international oil prices would also help contain Pakistan’s oil import bill, providing support to the country’s external account.
Reviewing the outgoing fiscal year 2025-26, the ministry said Pakistan had largely achieved macroeconomic stabilisation and was well-positioned to maintain growth momentum. It attributed the improved outlook to stronger macroeconomic fundamentals, continued expansion in manufacturing—particularly large-scale manufacturing (LSM)—a stable external account, better fiscal discipline and the resilience of the agriculture sector.
It said prudent macroeconomic management, continued fiscal consolidation and targeted support for productive sectors were expected to sustain growth while preserving economic stability. The ministry also highlighted a stronger external sector, driven by record workers’ remittances in May 2026 and continued growth in IT exports.
According to the report, robust remittance inflows and rising IT exports would strengthen the balance of payments, boost foreign exchange reserves and improve the economy’s resilience against external shocks.
The ministry maintained that with geopolitical risks declining, energy prices moderating, inflationary pressures expected to ease and external buffers strengthening, Pakistan’s economic outlook remained favourable, with growth likely to accelerate while maintaining macroeconomic stability.
It said the national economy was ending FY2026 on a stronger footing, marked by improved macroeconomic stability and sustained recovery in economic activity. Real GDP growth reached 3.7pc—the highest level in four years—while the size of the economy expanded to $452.1 billion.
Despite flood-related disruptions earlier in the fiscal year and volatility in global commodity markets, the ministry said Pakistan had preserved its stabilisation gains. Economic growth remained broad-based across agriculture, industry and services, while average inflation stayed in single digits and within the target range.
The report described fiscal performance as encouraging, crediting effective expenditure management, improved revenue collection and provincial budget surpluses for narrowing the fiscal deficit. It added that Pakistan achieved a primary surplus of 3.5pc of GDP during July-April FY2026.
The external sector also remained stable during the year, supported by sustained growth in remittances and IT exports, a broadly stable exchange rate, stronger foreign exchange reserves and improved import cover. The current account recorded a surplus of $255 million during July-May FY2026, reflecting continued resilience in the external account.
The ministry said investor confidence strengthened during the year due to the government’s commitment to the IMF-supported Extended Fund Facility and Resilience and Sustainability Facility programmes, along with sovereign rating upgrades from Fitch and Moody’s.
It said these improvements enabled Pakistan to re-enter international capital markets through a Eurobond issuance after a four-year gap, successfully launch a Panda Bond and witness the KSE-100 Index reach a record high, making it one of Asia’s fastest-growing stock markets.
The ministry added that the federal budget for 2026-27 was designed to build on these gains by prioritising export-led growth, taxpayer relief, stronger social protection and continued fiscal discipline. The budget also aims to preserve macroeconomic stability while enhancing business competitiveness, encouraging investment, broadening the tax base, advancing energy sector reforms and supporting stronger, more sustainable and inclusive economic growth.
Concluding its outlook, the finance ministry reiterated that easing geopolitical tensions following the US-Iran ceasefire were expected to further strengthen Pakistan’s economic prospects in FY2027 through continued reforms, improved confidence and a more supportive environment for business and investment.