- The CAD envisaged at 0.5% of GDP, or the equivalent of $2 billion for 2025-26.
- Pakistan will have to pay $1.3 billion by April 9 when the Eurobond matures.
- Pakistan’s economy is expected to reach Rs 141.66 billion in FY27.
ISLAMABAD: Pakistan and the International Monetary Fund (IMF) have revised upwards the CPI-based inflation projection in the wake of the ongoing war in the Gulf region for the current fiscal year, with inflation now expected to average 7.5 per cent in 2025-26, News reported Tuesday.
Earlier, the Finance Ministry had forecast CPI-based inflation at around 6.1% for the current fiscal year. The current account deficit (CAD), which remained a hot topic during the recently concluded review negotiations between the IMF and the Pakistani side, is envisaged at 0.5 per cent of GDP, equivalent to $2 billion for 2025-26. At one point, the Ministry of Planning had developed two scenarios predicting the CAD reaching $2.8 billion; however, Federal Finance Secretary Imdad Ullah Bosal, along with the economic advisor, convinced the IMF that the CAD would be reduced to $2 billion by the end of June 2026.
Pakistan will have to pay $1.3 billion on April 8 or 9, 2026, when the Eurobond matures, amid inability to launch any international bond, including Eurobonds, Sukuk bonds or Chinese Panda bonds, so far in the outgoing fiscal year. Even though Finance Minister Muhammad Aurangzeb has made several announcements, the Panda bond is yet to be launched.
Pakistan’s economy is expected to reach Rs 141.66 trillion in the next fiscal year 2026-27, up from Rs 126.9 trillion at the end of June 2026. The country’s GDP growth is expected to be 4.2% and CPI-based inflation 7.5% for 2025-26. GDP growth is projected at 5.1% and inflation at 6.5% for the next budget 2026-27.
According to the Ministry of Finance, during the first quarter of fiscal 2026, GDP growth is estimated at 3.71% (compared to 1.56% last year), driven by growth of 2.9% in agriculture, 9.4% in industry and 2.4% in the services sector.
Building on this initial momentum, signs of further improvement in economic activity are expected from the second quarter, supported by the easing of monetary policy, which should facilitate the expansion of credit to the private sector.
Further growth in PSDP spending (21% in the first half of FY2026), an increase in business start-ups (29% in the first half of FY2026), and a significant increase in agricultural machinery imports (27.3% in July-November of FY2026) indicate expansion and increase in production capacity.
Large-scale manufacturing (LSM) recorded a growth of 5.02 per cent during July-October FY2026, with 16 sectors registering growth, including textile, apparel, non-metallic mineral products, food, coke and petroleum products, electrical equipment, automobile and tobacco.
The services sector is expected to strengthen thanks to trade and transport, finance, digitalization, e-commerce and rapid growth in ICT exports. On the supply side, in the agricultural sector, the main crops of rice, corn and sugarcane have seen growth compared to last year, and wheat is also expected to meet the target. In the first quarter of fiscal 2026, the herd also increased by 6.3% compared to last year.
These sectors are expected to show consistent performance over the coming quarters. Anticipating continued positive momentum in domestic economic activities, the economy is expected to grow by 4.0% in FY2026 and 5.1% in FY2027.
In the aftermath of the Gulf War, inflationary pressures are increasing and it is estimated that inflation could reach 7.5% on average for 2025-2026. In the next fiscal year, CPI-based inflation is expected to decline, provided the war ends quickly and the fuel supply chain is fully restored. Furthermore, the SBP will need to remain vigilant to combat inflation in the country in the medium term.
