Growth or Pressure? What Pakistan’s Economic Survey Reveals

Shazia Mehboob

Islamabad: Pakistan’s Economic Survey 2025-26 paints a mixed but cautiously optimistic picture of the country’s economy, one where growth indicators have improved after years of instability, yet structural weaknesses continue to weigh heavily on ordinary citizens and key sectors.

Presenting the annual survey on Thursday, Federal Finance Minister Muhammad Aurangzeb described the document as the “economic story” of the past fiscal year, highlighting gains in economic growth, industry, remittances, tax collection and investor confidence despite regional tensions and global uncertainty.

The government claims the economy has regained momentum after a turbulent period marked by inflation, external financing concerns and uncertainty over international trade and tariffs.

• GDP growth rises to 3.7%, up from 3.2% last year, highest in four years
• Economy size reaches $452.1 billion, showing overall expansion
• LSM grows 6.1%, strongest industrial performance in four years
• Current account posts $72 million surplus during July–March period
• Foreign exchange reserves climb to $17.1 billion, expected to reach $18 billion by June
• Debt-to-GDP ratio stands at 68.5%, indicating continued fiscal pressure despite gains

Growth Returns After Difficult Years

According to the survey, Pakistan’s economy grew by 3.7 percent during fiscal year 2025-26, compared to 3.2 per cent last year, the highest growth rate recorded in four years.

Aurangzeb said the economy had shown resilience despite geopolitical tensions in the Middle East and difficult global conditions.

The total size of Pakistan’s economy has now reached $452.1 billion.

One of the strongest areas of recovery was the industrial sector. Large-scale manufacturing (LSM) expanded by 6.1 percent, also its best performance in four years. The finance minister said 16 out of 22 industrial sectors recorded growth.

Demand for cement rose by 10 percent, while fertilizer, petroleum and mobile phone sectors also showed significant expansion, signaling improved industrial and consumer activity.

The services sector also posted strong growth of 4.9 percent, supported by improvements in banking, communications and trade-related services.

Tax Collection, Remittances And Reserves Improve

The government also highlighted gains in fiscal management and external accounts.

According to the Federal Board of Revenue (FBR), tax collection increased significantly over the past two years. 

Authorities said tax revenue rose by 40 percent during this period, while FBR collections are expected to increase from Rs41.9 trillion in June 2025 to Rs46.4 trillion by June 2026.

Aurangzeb said the fiscal deficit remained limited to 0.7 per cent of GDP, while Pakistan’s current account posted a surplus of $72 million during July-March.

Remittances from overseas Pakistanis remained another major support for the economy. The finance minister said the country received $4.2 billion in remittances last month alone.

Foreign exchange reserves also improved steadily and currently stand at $17.1 billion, with the government expecting reserves to touch $18 billion by the end of June.

The minister further claimed that investor confidence had returned, pointing to Pakistan’s successful return to international financial markets through Eurobonds after a four-year gap and the issuance of Panda Bonds in China.

Exports Still A Weak Spot

Despite improvements in several indicators, exports remained a major concern.

The survey noted that overall export performance remained weaker than expected, largely due to a sharp decline in rice and food exports. Rice exports alone fell by $1.1 billion, while food sector exports declined by another $1.5 billion.

However, textile-related exports showed some resilience. Garment exports increased by five percent, while home textile exports rose by three percent during July-May.

The finance minister also highlighted Pakistan’s football manufacturing industry, noting that footballs made in Pakistan continue to be used in FIFA World Cup tournaments, a symbolic reminder of the country’s export potential despite broader trade challenges.

Agriculture Remains Under Pressure

The agricultural sector, which supports a large portion of Pakistan’s population, continued to underperform.

The sector recorded growth of only 2.8 percent, making it one of the weakest-performing areas of the economy this year.

Economists have repeatedly warned that climate pressures, rising input costs, water shortages and inconsistent policy support are affecting agricultural productivity and rural incomes.

The survey also acknowledged that inflation and rising petroleum prices continue to place financial pressure on households despite broader macroeconomic improvements.

Debt Burden Still High

Although the government emphasized progress in stabilizing the economy, Pakistan’s debt burden remains substantial.

According to the survey, the country’s debt-to-GDP ratio stands at 68.5 percent. Aurangzeb said around 40 to 45 percent of total debt had been acquired on concessional terms, helping reduce repayment pressure.

The finance minister argued that improving global investor confidence reflected trust in Pakistan’s economic direction and reforms.

He added that per capita annual income has now increased to $1,901.

Focus On IT Growth

The government also highlighted progress in digital reforms and the technology sector.

Aurangzeb said authorities had worked extensively on digital production monitoring systems aimed at improving industrial oversight and tax collection transparency.

Meanwhile, Pakistan’s IT exports are expected to reach $4.5 billion by the end of the current fiscal year, reflecting continued growth in the country’s digital economy.

A Recovery Still Being Tested

While the Economic Survey projects a more stable economic trajectory compared to previous years, challenges remain deeply rooted.

Rising living costs, weak agricultural growth, dependence on remittances, export volatility and a high debt burden continue to test the sustainability of the recovery.

For many Pakistanis, the key question remains whether improving macroeconomic indicators will eventually translate into lower inflation, more jobs and real relief at the household level.