Pakistan Achieves 3.71% GDP Growth in First Quarter FY2026

Pakistan’s economy gains momentum in Q1 FY2026, powered by industrial rebound, resilient agriculture, and prudent fiscal management that delivered a surplus, according to the Finance Ministry’s December 2025 Economic Update.

The GDP growth hits 3.71% led by industry surge and in first quarter of FY2025-26, GDP expanded by 3.71%, fueled by agriculture’s steady 2.89% growth, a strong 9.38% rise in industry, and 2.35% in services, the report said.

High-frequency indicators reflect this upward trend, with workers’ remittances climbing and foreign exchange reserves reaching their highest level since March 2022—$21.0 billion as of December 19, including $15.9 billion held by the State Bank of Pakistan (SBP).

A successful IMF review unlocked $1.2 billion under the Extended Fund Facility and Resilience and Sustainability Facility, bolstering reserves and stability.

According to the report ,fiscal Surplus achieved through tight management and Prudent fiscal policies yielded a consolidated surplus of 1.0% of GDP for Jul-Oct FY2026 (up from 0.4% last year), thanks to 7.7% growth in federal receipts and a 4.8% drop in expenditures.

The primary surplus held steady at 2.7% of GDP. Federal Board of Revenue (FBR) collections hit Rs. 4,734 billion for Jul-Nov FY2026, up 10.2% year-on-year.

Direct taxes rose 10.5%, sales tax 8.5%, federal excise duty 18.2%, and customs duty 10.1%.

Industry roars back and LSM up 5.02%, now Large-Scale Manufacturing (LSM) grew 5.02% in Jul-Oct FY2026, with 16 sectors in positive territory—including textiles, automobiles, cement, food, and electrical equipment. October 2025 saw LSM surge 8.3% year-on-year and 3.7% month-on-month.

According to the Ministry of finance, automobile production soared: cars up 65.1%, trucks and buses 97.0%, jeeps and pick-ups 38.8% and Cement dispatches reached 21.4 million tonnes (up 11.5%), with domestic sales jumping 14.7% to 17.4 million tonnes.

External account mixed, remittances shine with rose 9.3% to $16.1 billion in Jul-Nov FY2026, led by Saudi Arabia (24.2%) and UAE (20.8%) and IT exports jumped 18.5% to $1.8 billion.

According to the report, goods exports dipped 3.2% to $12.8 billion, while imports grew 11.1% to $25.6 billion, widening the trade deficit to $12.8 billion.

Services exports increased 16.7% to $3.8 billion. The current account showed a $100 million surplus in November but a $812 million deficit for Jul-Nov (vs. $503 million surplus last year). Net FDI inflows hit $927.4 million, mainly from China and Hong Kong into power and financial services.

Agriculture sector bolstered for ‘Rabi harvest and the government targets 29.68 million tonnes of wheat from 9.65 million hectares in Rabi 2025-26, backed by higher agricultural credit (up 18.6% to Rs. 1,097.6 billion), machinery imports (up 27.3% to $58 million), and urea offtake (up 15.6%). DAP offtake fell 16.1%.

According to the report inflation eases slightly to 6.1% and CPI inflation dipped to 6.1% year-on-year in November 2025 (from 6.2% prior month), with a 0.4% month-on-month rise. Key drivers included education (9.0%) and health (8.3%), while perishable foods declined 7.3%.