Pakistan flags wider economic rebound, diverges from IMF outlook

February 11, 2026 (MLN): Pakistan’s economy could grow by as much as 4.75% in the current fiscal year, which presents a more upbeat outlook than recent projections from the International Monetary Fund and signaling confidence in a recovery that could spread across multiple sectors despite external pressures.

State Bank of Pakistan (SBP) Governor Jameel Ahmad said the bank raised its FY26 growth forecast to 3.75–4.75% at its January policy meeting, lifting the previous range by 0.5 percentage points.

He argued that the improvement is broader than export data alone indicate, pointing to firmer domestic demand, stronger manufacturing activity and resilient agricultural output even after last year’s floods, as reported by Reuters.

He said differences between the SBP’s projections and the IMF’s estimates were not unusual and largely reflected timing variations as well as the IMF’s inclusion of flood-related assessments in its latest outlook.

First-quarter fiscal data and several high-frequency indicators, he added, suggest gains across agriculture, industry and services.

In its June World Economic Outlook update, the IMF had projected Pakistan’s GDP growth at about 3.6% for FY26, while slightly revising FY25 growth upward to around 2.7%.

The IMF report also noted a mild improvement in the global growth outlook alongside easing financial conditions, a softer US dollar and renewed capital flows into emerging markets.

Governor Ahmad also highlighted that financial conditions have eased sharply following a cumulative 1,150 basis-point cut in the policy rate since June 2024, with the full impact still moving through the economy.

This, he said, is helping support expansion while maintaining price and economic stability. Despite market expectations for further easing, the central bank kept its benchmark interest rate unchanged at 10.5% last month.

The differing outlooks come as Pakistan seeks to solidify economic stability under a $7 billion IMF programme after emerging from a balance-of-payments crisis.

Previous growth upswings in the country have often triggered pressure on the currency and foreign-exchange reserves, leaving investors focused on whether the current rebound can be sustained.

The Governor pointed to roughly 6% growth in large-scale manufacturing between July and November, along with other high-frequency indicators, as evidence of strengthening demand.

The main contributors toward the overall 6.01% cumulative growth were automobiles (1.77% points), petroleum products (1.29), garments (1.24), cement (0.78), food (0.47), and textiles (0.32). Conversely, pharmaceuticals (-0.34) and iron & steel products (-0.17) weighed on overall growth.

The sustained growth momentum in Pakistan's manufacturing sector shows improving economic conditions and strengthening domestic demand, particularly in the automobile and construction-related industries.

While exports declined in the first half of the fiscal year, he said the fall was mainly driven by lower global prices and temporary border disruptions rather than weaker domestic activity.

On external accounts, the central bank sees the current account deficit remaining within 0–1% of gross domestic product, supported by steady remittance inflows that are offsetting a wider trade gap and helping lift foreign-exchange reserves above programme targets.

Additional inflows are anticipated around the Eid festival period.

Pakistan is also preparing to issue yuan-denominated panda bonds in China’s domestic market near the Lunar New Year as part of efforts to diversify external financing and broaden its investor base.

Preparatory work for subsequent issuances under “Panda Series II” has already commenced, with Chinese regulatory authorities fully apprised of this phased approach.

Furthermore, Governor Jameel Ahmad said the SBP has been regularly purchasing dollars in the interbank market to strengthen reserve buffers, with transaction data published periodically, while stressing that continued structural reforms remain essential for sustaining stronger long-term growth.

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