Pakistan's economy grew at a rate of 3.7% in the fiscal year 2025-26, falling short of the government's target, Finance Minister Muhammad Aurangzeb announced on Thursday. Presenting the Pakistan Economic Survey (PES) at a press conference in Islamabad ahead of the national budget scheduled for Friday, Aurangzeb highlighted that the growth rate, while below expectations, still outpaced the global economic growth of 3.1%.
Factors Behind the Missed Target
The finance minister attributed the shortfall primarily to the ongoing conflict in West Asia, which has disrupted trade routes and increased energy costs. He noted that geopolitical tensions have created an uncertain environment for investment and economic activity. Despite these challenges, the minister expressed optimism about the economy's resilience, pointing to sectors such as agriculture and services that showed moderate growth.
Performance of Key Sectors
The Pakistan Economic Survey revealed varied performance across different sectors. The agriculture sector grew by 4.2%, driven by better crop yields and government support programs. The industrial sector expanded by 2.8%, with manufacturing and construction showing signs of recovery. However, the services sector, which accounts for a significant portion of the economy, grew by 3.5%, slightly below the overall growth rate.
Inflation and Fiscal Deficit
Inflation remained a concern, averaging 12.5% during the fiscal year, though it showed a declining trend in the second half. The fiscal deficit stood at 6.8% of GDP, marginally higher than the target of 6.5%. Aurangzeb assured that the government is committed to fiscal consolidation and structural reforms to stabilize the economy.
Global Context and Comparisons
The finance minister emphasized that Pakistan's growth rate of 3.7% is commendable given the global economic slowdown. He pointed out that many countries in the region have faced similar or worse economic headwinds. The government aims to achieve a growth rate of 4.5% in the next fiscal year, contingent on improved global conditions and domestic policy implementation.
The budget announcement on Friday is expected to outline measures to boost economic activity, enhance revenue collection, and provide relief to the public. Analysts await details on tax reforms, energy subsidies, and social safety nets.
