Pakistan economy shows positive outlook on improving indicators

December 31, 2025 (MLN): Pakistan’s economic outlook remains broadly positive, supported by sustained growth in industrial activity and improving macroeconomic indicators, according to the latest Monthly Economic Update & Outlook report released by the Government of Pakistan Finance Division’s Economic Adviser’s Wing.

Agricultural activity received a boost during the first five months of FY2026, with farm credit disbursement rising by 18.6% to Rs1.10tr during July–November, compared to Rs925.7bn a year earlier.

Increased mechanization was also evident, as imports of agricultural machinery and implements climbed 27.3% to $58 million over the same period.

Fertilizer usage during the early Rabi season reflected mixed trends. Urea offtake increased to 1.17 million tonnes, up 15.6% year-on-year, while DAP consumption declined by 16.1% to 464 thousand tonnes, pointing to uneven input utilization.

Industrial output maintained its recovery momentum, with Large-Scale Manufacturing (LSM) expanding by 5.02% during July–October FY2026.

Growth was recorded across 16 manufacturing sectors, including textiles, food, automobiles, electrical equipment, petroleum products and tobacco.

In October 2025, LSM growth accelerated to 8.3% YoY, supported by strong performance in the automobile sector.

During July–November FY2026, car production surged 65.1%, while output of trucks and buses nearly doubled.

The cement industry also posted gains, with total dispatches rising 11.5% to 21.4 million tonnes, led by higher domestic demand.

Inflation edged down slightly in November 2025, with headline CPI easing to 6.1% YoY. Month-on-month inflation slowed to 0.4%, which indicated easing price pressures.

Education, health, transport and non-perishable food items remained key drivers of inflation, while prices of perishable food items declined.

Short-term price stability was further reflected in a 0.09% decline in the Sensitive Price Indicator during the week ending December 24.

Improved fiscal discipline resulted in a consolidated fiscal surplus of 1% of GDP during July–October FY2026, compared to 0.4% last year.

Revenue performance strengthened, with FBR collections increasing by 10.2% to Rs4.73tr during July–November, supported by growth across all major tax categories.

External sector indicators showed mixed but manageable trends. Imports rose 11.1% to $25.6bn, reflected a higher economic activity, while exports of goods dipped slightly.

However, textile exports such as knitwear and garments recorded gains. Services exports increased sharply, led by an 18.5% rise in IT exports to $1.8bn.

Remittance inflows grew by 9.3% to $16.1bn, with Saudi Arabia and the UAE remaining the largest sources.

Foreign direct investment amounted to $927.4m during July–November FY2026, mainly in the power and financial services sectors, while portfolio flows remained negative.

Pakistan’s foreign exchange reserves stood at $21.0bn as of December 19, 2025, including $15.9bn held by the State Bank.

In response to easing inflation expectations, the Monetary Policy Committee cut the policy rate by 50 basis points to 10.5% in December.

The Pakistan Stock Exchange reacted positively, with the KSE-100 Index gaining over 5,000 points in November, that sparked renewed investor confidence.

On the social side, overseas employment registrations totaled 349,850 workers during July–November FY2026, though monthly registrations declined in November.

Social protection spending also increased, with BISP disbursements rising 26.8% to Rs143.5bn during July–October FY2026.

Overall, the improving performance of key economic sectors points to a gradual strengthening of economic conditions.

Stable inflation, stronger fiscal management and rising industrial activity are helping support growth, while remittances and services exports continue to ease external pressures.

Maintaining reform momentum and policy consistency will remain crucial for sustaining economic stability in the coming months.

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