ISLAMABAD: Pakistan’s economy sustained its trajectory of stabilisation and growth during the first two months of the current fiscal year, the finance ministry reported on Tuesday, even amid disruptions caused by severe floods.
According to the “Monthly Economic Update and Outlook” for September 2025, released by the Finance Division, the economy demonstrated stability, supported by moderating inflation, strong performance in Large-Scale Manufacturing (LSM), and improved fiscal discipline.
Industrial Momentum and Easing Inflation
Industrial momentum strengthened significantly, with the LSM sector posting 9% year-on-year growth in July, driven primarily by textiles, automobiles, and cement. Cement dispatches saw a rise of over 20%, while automobile production recorded sharp gains across various vehicle categories.
Inflationary pressures eased considerably, with the Consumer Price Index (CPI) inflation dropping to 3.0% in August, down sharply from 9.6% a year earlier. Cumulatively, inflation stood at 3.5% during July–August FY26, a significant decline from 10.4% recorded in the corresponding period last year.
Fiscal Resilience and External Sector Stability
Fiscal accounts reflected resilience, with robust revenue mobilization and strict expenditure discipline helping to contain the deficit at 0.2% of GDP. This performance resulted in a notable primary surplus of Rs228.9 billion. Revenue collection by the Federal Board of Revenue (FBR) rose by 14.1% to reach Rs1.66 trillion during the period.
The external sector remained broadly stable:
- Exports increased by 10.2% to reach $5.3 billion.
- Remittances climbed by 7% to $6.4 billion.
- Foreign exchange reserves reached $19.8 billion by September 19, 2025, with $14.4 billion held by the State Bank of Pakistan.
The Pakistan Stock Exchange sustained its bullish run, with the KSE-100 Index closing at 148,617 points in August, reflecting sustained investor confidence.
Outlook and Cautionary Notes
The report projected a stable macroeconomic outlook, underpinned by the ongoing industrial recovery, steady growth in remittances, and easing global commodity prices.
However, it cautioned that flood-related disruptions could create temporary pressure on food supplies and push inflation slightly higher, though it is expected to remain contained within the 3.5–4.5% range in September 2025. Globally, Fitch Ratings forecasts growth at 2.4% for 2025, with improving demand in Pakistan’s main export markets, including the US, China, and the Eurozone, expected to support the country’s external account moving forward.
