Pakistan’s economy is projected to grow by 3.7% in fiscal year 2025-26, rebounding from years of economic stress amidst easing inflation and improving fiscal indicators under reforms backed by the International Monetary Fund (IMF), according to official Economic Survey 2025-26 documents.
The survey showed that the size of the economy is estimated to reach $452 billion in FY26, up from $408 billion a year earlier, while per capita income is expected to rise to $1,901 from $1,824 in the previous fiscal year. However, it also shows the government failed to achieve most of its targets, as last year’s budget had sought growth of 4.2%.
Average inflation is projected at 6.7% during FY26, marking a significant decline from double-digit levels recorded in recent years and providing relief to consumers and businesses.
The survey attributed the economic recovery to stabilization measures, improved macroeconomic management and reforms undertaken under Pakistan’s IMF-supported program. Agriculture, which remains a key pillar of the economy, is projected to expand by 2.9% during FY26 despite challenges in major crops. The industrial sector is expected to grow by 3.5%, supported by a gradual recovery in manufacturing activity, while the services sector, the largest contributor to GDP, is projected to post growth of 4.1%.
Fiscal indicators also showed notable improvement. According to the survey, the fiscal deficit narrowed to 1.1% of GDP during the first 10 months of FY26, compared with 3.2% of GDP in the corresponding period last year, reflecting stronger revenue collection and expenditure discipline.
The primary balance, which excludes interest payments, recorded a surplus of 3.5% of GDP during July-April FY26, compared with 3.2% in the same period a year earlier.
Tax collection by the Federal Board of Revenue (FBR) increased by 10% year-on-year to Rs. 11.229 trillion during the first 10 months of the fiscal year, while non-tax revenues rose by 10% to Rs. 4.633 trillion, according to the survey documents. The government’s tax collection target for the outgoing fiscal was Rs. 14,131 trillion, which was eventually revised down to around Rs. 13 trillion.
Private-sector credit also strengthened, reaching Rs. 987 billion during July-April FY26 compared with Rs. 694 billion in the same period last year. Agricultural credit expanded to Rs. 2.458 trillion from Rs. 2.067 trillion, indicating improved financing conditions for businesses and farmers.
Despite the improvement in domestic indicators, Pakistan’s external sector remained under pressure. The current account recorded a deficit of $200 million during July-April FY26, compared with a surplus of $1.7 billion in the corresponding period last year. Exports fell 5.4% year-on-year to $25.8 billion, while imports increased 8.5% to $52.8 billion, widening the trade gap as economic activity picked up.
Economists said the survey highlighted the economy’s transition from stabilization to recovery but cautioned that sustaining growth would require stronger exports and investment. “The increase in GDP size, lower inflation and improved fiscal indicators suggest that macroeconomic stability is returning,” said one economist. “The next phase will be ensuring that growth becomes sustainable through higher investment, productivity gains and export expansion,” he added.
A leading analyst said the narrowing fiscal deficit and stronger primary surplus reflected successful implementation of IMF-backed reforms. “Pakistan has achieved significant fiscal consolidation over the past year. However, the external account remains vulnerable and improving export competitiveness will be critical for maintaining economic stability,” he said.
The Economic Survey 2025-26 presents a picture of an economy emerging from crisis, with stronger growth, lower inflation, improved fiscal management and rising incomes, although challenges remain in the external sector amid declining exports and a widening trade deficit.