Pakistan Economic Survey 2025-26: GDP Grows 3.7%, Remittances Hit Record $41 Billion Ahead of Budget 2026-27

ISLAMABAD — Pakistan’s Finance Minister Muhammad Aurangzeb on Thursday presented the Pakistan Economic Survey 2025-26, the government’s flagship annual economic report, a day before the federal Budget 2026-27 is due to be presented before the National Assembly on June 12, 2026.

The survey reveals that Pakistan’s economy expanded by 3.7 percent during the outgoing fiscal year — below the official target of 4.2 percent, but a step up from the 3.1 percent growth recorded in FY2025. Aurangzeb attributed the shortfall to regional tensions linked to the Iran conflict, heavy monsoon disruptions, and a broader slowdown in the global economy, which itself decelerated from 3.7 percent to 3.1 percent growth over the same period.

Macro Stability: Lower Inflation, Record Surplus, Stronger Reserves

Despite the growth miss, the Pakistan Economic Survey 2025-26 points to notable improvements in macroeconomic fundamentals. Average inflation for the year came in at approximately 6.7 percent — well below the annual target of 7.5 percent, and a dramatic fall from the double-digit inflation that weighed on households in recent years. The country’s primary surplus reached 3.5 percent of GDP, the highest in over two decades and a reflection of tight fiscal discipline maintained under the IMF program.

Federal Board of Revenue (FBR) tax collections rose to Rs11.229 trillion, while non-tax revenues added another Rs4.633 trillion to government coffers. Pakistan’s fiscal deficit is projected at a 21-year low of 3.6 percent of GDP for FY26, driven by record central bank profits, a 45 percent jump in petroleum development levy receipts, and early retirement of domestic debt that brought interest payment obligations down sharply.

Foreign exchange reserves climbed to $17.2 billion, marking a 49 percent increase year-on-year, improving import cover to 2.75 months — a signal of greater stability in Pakistan’s external position heading into Budget 2026-27.

Remittances: A Record-Breaking Bright Spot

Workers’ remittances were among the standout performers of the year. Overseas Pakistanis sent home approximately $38 billion in the first eleven months of the fiscal year — a 9 percent increase over the prior year — with full-year inflows projected to reach a record $41 billion by the close of FY2026. The finance minister credited the Roshan Digital Account initiative as a key driver, encouraging Pakistanis abroad to channel savings into formal banking channels.

Agriculture: Well Short of Target

Agriculture — the backbone of Pakistan’s rural economy, employing roughly 38 percent of the workforce — posted provisional growth of 2.89 percent, significantly below the 4.5 percent target set at the start of the fiscal year. Major crops grew at just 0.65 percent against an ambitious 6.7 percent target, while the cotton crop — critical to the textile sector and exports — fell 0.5 percent to 7.05 million bales.

On the positive side, wheat production increased to 29.6 million tonnes (+4.3%), rice output reached nearly 10 million tonnes (+2.8%), and sugarcane production climbed to 89.45 million tonnes (+6.2%). Minor crops also performed well, with chickpea production surging over 50 percent and banana and potato output each recording double-digit gains.

Industry and Services: Mixed Picture

Industrial growth came in at 3.51 percent, below the 4.3 percent target, but supported by a recovery in large-scale manufacturing — particularly textiles, cement, and automobiles, which rebounded with 4.8 percent growth in the first half of the year. The services sector was the relative outperformer, expanding by 4.09 percent, marginally ahead of its 4 percent target, driven by wholesale and retail trade, financial services, and IT-enabled services.

IT exports were a headline success, reaching $3.8 billion for the fiscal year — a 21 percent increase year-on-year — underscoring the growing role of Pakistan’s technology sector as a foreign exchange earner and a priority area heading into Budget 2026-27 planning.

External Sector: Trade Gap Widens Despite Reserve Gains

The external account presented a mixed picture. During the July–April period, the current account swung to a deficit of $200 million, compared with a surplus of $1.7 billion in the same period a year earlier. Merchandise exports declined 5.4 percent to $25.8 billion over the period, while imports rose 8.5 percent to $52.8 billion — driven partly by higher energy import costs linked to regional disruptions. Against the full-year export target of $35.3 billion, actual exports for eleven months stood at just $28 billion.

What to Expect From Budget 2026-27

The Pakistan Economic Survey serves as the baseline document for the federal budget, and this year’s report sets a complex backdrop for Finance Minister Aurangzeb as he prepares to address the National Assembly on June 12, 2026. The Budget 2026-27 is expected to focus on maintaining the IMF-mandated fiscal path — keeping the deficit in check while seeking new revenues — while also addressing the social cost of tight economic policies on lower-income households.

Reports ahead of the budget suggest the government is considering a carbon levy of up to 19.5 percent on vehicles above 2,000cc, measures to expand the tax base beyond the existing registered filers, and further enhancements to the BISP social protection programme. With the IMF projecting Pakistan’s GDP growth at around 3.5 percent for FY27 and inflation risks remaining elevated due to global energy price pressures, the Budget 2026-27 will be closely watched by markets, businesses, and international lenders alike.

The State Bank of Pakistan raised its policy rate to 11.5 percent in April 2026 — signaling that monetary policy will not accommodate fiscal expansion — leaving the government with limited room to boost spending ahead of the new fiscal year.