ISLAMABAD: The Ministry of Finance has projected GDP growth of 4.2 per cent, supported by a rebound in agriculture and other sectors. Inflation is anticipated to remain within the 3.5-4.5 per cent range.
In its Monthly Economic Outlook for July 2025, released on Monday, the ministry attributes the agricultural recovery to increased input support and rising mechanisation. “The rebound is expected to boost imports of raw materials and intermediate goods, while supporting exports of value-added products. Strengthening domestic demand, a stable exchange rate, steady global commodity prices, and improved foreign demand are likely to enhance exports, remittances, and imports in July 2025, reinforcing external sector stability. Inflation is projected to remain within 3.5 per cent to 4.5 per cent, though risks from recent heavy rains may affect agricultural yields and supply chains,” the Ministry of Finance stated.
Pakistan’s economy is expected to maintain its recovery in early FY2026, supported by improved macroeconomic fundamentals and rising investor confidence. Large-scale manufacturing (LSM) is likely to sustain its momentum in June 2025, driven by increased private sector credit off-take and expanding production activity.
As FY25 concludes, Pakistan’s economy has shown clear signs of recovery and growing resilience. It maintained a growth rate of 2.68 per cent, while inflation dropped sharply to 4.5 per cent, aided by a lower policy rate, exchange rate stability, and prudent macroeconomic management. The current account recorded a surplus of $2.1 billion -- the first annual surplus in 14 years and the largest in 22 years -- reflecting improved external balances, stronger exports and remittances and rising foreign exchange reserves.
The fiscal deficit was contained at 3.1 per cent of GDP for July-May FY25, reflecting improved fiscal discipline and resource management. These developments have strengthened market confidence, eased currency pressures, and created space for monetary easing to support growth.
“Building on this momentum, FY26 begins with a renewed focus on sustainable and inclusive growth. Policy priorities include continued fiscal consolidation, enhanced revenue mobilisation, modernisation of the agriculture and industrial sectors, and improvements in the business climate and human capital development,” the ministry added.
Social protection and climate resilience will also remain integral to aligning short-term economic actions with Pakistan’s long-term development goals. Accordingly, real GDP is expected to grow by 4.2 per cent in FY26, alongside continued price stabilisation.
During July-May FY2025, agricultural credit disbursement rose to Rs 2,300.4 billion, marking a 16.6 per cent increase from Rs 1,972.8 billion in the same period last year. Imports of agricultural machinery surged by 20 per cent, reaching $109.6 million in FY25.
In the Kharif 2025 season (April-June), urea off-take was recorded at 1,251 thousand tonnes (3.4 per cent higher than in Kharif 2024), while DAP off-take rose sharply by 20.1 per cent to 308 thousand tonnes. The increase is attributed to higher prices prompting greater channel inventory.
The LSM sector registered 7.9 per cent month-on-month (MoM) growth and a 2.3 per cent year-on-year (YoY) increase in May 2025. However, cumulative LSM output declined by 1.2 per cent during July-May FY2025, compared to marginal growth of 0.9 per cent last year. Over this period, 12 out of 22 sectors recorded positive growth, including textiles, wearing apparel, coke and petroleum products, beverages, and pharmaceuticals.
The automobile sector showed strong performance during July-June FY2025, supported by substantial increases in the production of cars (40 per cent), trucks and buses (96.8 per cent), and jeeps & pick-ups (74.6 per cent). Cement dispatches stood at 46.2 million tonnes during the same period, marking a 2.1 per cent increase from the previous year. Domestic cement sales declined by 3.1 per cent to 37 million tonnes, while exports rose significantly by 29.5 per cent to 9.2 million tonnes.
The Consumer Price Index (CPI) averaged 4.5 per cent for FY25, a substantial drop from 23.4 per cent during the same period last year. CPI inflation was recorded at 3.2 per cent YoY in June 2025, compared to 12.6 per cent in June 2024. On a MoM basis, inflation rose by 0.2 per cent, following a 0.2 per cent decline in May 2025.
A key factor behind this moderation is the significant decline in perishable food prices, which fell by 10.6 per cent YoY, easing pressure on the overall food basket. Additionally, the housing, water, electricity, gas and fuels group recorded a 3.3 per cent decline.
Conversely, upward pressure came from health (12.2 per cent), education (10.1 per cent), clothing & footwear (8.9 per cent), restaurants & hotels (8.4 per cent), alcoholic beverages & tobacco (5.1 per cent), non-perishable food items (4.8 per cent), furnishing & household equipment maintenance (3.7 per cent), transport (0.6 per cent), and communication (0.5 per cent).
The Sensitive Price Index (SPI) for the week ending July 17 increased by 0.38 per cent. Of the 51 essential items monitored, prices of 22 items increased, nine declined, and 20 remained stable.
Pakistan’s current account recorded a surplus of $328 million in June 2025, bringing the total FY25 surplus to $2.11 billion -- the first annual surplus in 14 years and the largest in 22 years. This compares with a deficit of $2.07 billion in FY2024. The improvement was driven by strong growth in workers’ remittances and exports, which more than offset the impact of higher imports, reflecting improved external sector dynamics and effective macroeconomic management.