Economy shows stability, growth in first two months of FY26: ministry

ISLAMABAD: Despite disruptions caused by recent severe floods, the country’s economy maintained its trajectory of stabilisation and growth during the first two months of the current fiscal year, the finance ministry reported on Tuesday.

Economy showed stability supported by moderating inflation, strong large-scale manufacturing (LSM), and improved fiscal discipline, according to the “Monthly Economic Update and Outlook” for September 2025 issued by the Finance Division.

Industrial momentum strengthened with the LSM sector posting 9% year-on-year growth in July, led by textiles, automobiles, and cement, it added.

Cement dispatches rose over 20%, while automobile production recorded sharp gains across vehicles.

Inflationary pressures eased considerably, with Consumer Price Index (CPI) inflation dropping to 3.0% in August compared to 9.6% a year earlier.

On a cumulative basis, inflation stood at 3.5% during July–August FY26, down from 10.4% in the same period last year.

Fiscal accounts reflected resilience, with revenue mobilization and expenditure discipline helping to contain the deficit at 0.2% of GDP and yielding a primary surplus of Rs228.9 billion.

Federal Board of Revenue’s collection rose 14.1% to Rs1.66 trillion during the period.

The external sector remained broadly stable.

Exports increased 10.2% to $5.3 billion, while remittances climbed 7% to $6.4 billion.

Foreign exchange reserves reached $19.8 billion by September 19, 2025, including $14.4 billion with the State Bank of Pakistan.

The Pakistan Stock Exchange also sustained its bullish run, with the KSE-100 Index closing at 148,617 points in August, reflecting investor confidence.

Looking ahead, the report projected a stable macroeconomic outlook, underpinned by industrial recovery, steady 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 3.5–4.5% in September 2025.

At the global level, Fitch Ratings forecast growth at 2.4% for 2025, with improving demand in Pakistan’s main export markets, such as the US, China, and the Eurozone expected to support the country’s external account going forward.