The Economic Survey of Pakistan released on Thursday showed that the government fell short of three major macroeconomic targets, but maintained external sector stability and broad-based recovery in the outgoing fiscal year, despite the negative impacts of the Middle East war. According to the Economic Survey of Pakistan 2025-26, the government could not achieve the economic growth targets of 4.2% and the investment-to-GDP and savings-to-GDP ratio were also below the set targets. These indicators are considered the foundation for higher and sustainable economic growth without falling into the debt trap. The tax target of the Federal Board of Revenue is also not met by a significant margin of over Rs 1 trillion. But the government was close to hitting the primary budget surplus target – a key element for continuing the International Monetary Fund program, and the inflation target could also be met despite supply shocks. Dual deficits – of the budget and current account – have been real problems for Pakistan for a longer time and have been brought under control, Finance Minister Muhammad Aurangzeb said while sharing the key findings of the survey. The budget deficit stood at 0.7% of GDP during the first nine months of this fiscal year, while the primary balance remained in surplus. The current account recorded a surplus of $72 million. The Minister of Finance affirmed that in the future, remittances will remain a very important element of the stability of the external sector. Aurangzeb recounted the difficult journey of the financial year 2025-26, which began amid tariff uncertainty and the impact of floods of three rivers impacting crops in the Punjab province.
"When we started this financial year in July, the first thing we faced was trade uncertainty, due to tariff discussions on how to deal with tariffs around the world and which reached a point at the end of July where we could get into a competitive position with respect to our exports, particularly to the United States." » added Aurangzeb. Right after this, he mentioned, Pakistan faced floods, which led to rescue and relief efforts for rehabilitation of the population and reconstruction of infrastructure. The story didn’t end there, like in March; a regional conflict has broken out, Aurangzeb said. Aurangzeb pointed out that among these three exogenous factors, only tariff uncertainty prevailed at the time of presentation of the previous economic study. "The other factors were not present in the table."
The minister said the government still achieved economic growth of 3.7%, indicating widespread recovery. The government hoped to achieve a growth rate above 4%, but war broke out, missing the annual target. It also failed to meet investment and savings targets, which remain low and need to be significantly higher to ensure a higher growth rate. Responding to a question, the Finance Minister said investment and tax to GDP ratios were hovering around the same levels and needed to increase. The government will also miss its export targets for this fiscal year, as exports remained negative by almost 6%. Nine million Pakistanis send $40 billion in remittances, but 250 million people make barely $40 billion in exports (of goods and services), Ahsan Iqbal said while speaking on the occasion.
"The decline in exports is our biggest failure, forcing the government to take loans as a temporary solution."declared the Minister of Planning. We need to think about how Vietnam, with a population of 100 million, got $38 billion in foreign direct investment while Pakistan could hardly get $1.5 billion, Iqbal said. Replying to a question, the Finance Minister said reforms have been introduced in the FBR but it will take at least one to two years to change the culture. The Finance Minister said the culture of nepotism was disappearing in the FBR but there remained issues related to theft and collusion. The Finance Minister further said that local investment must lead foreign investment and policy continuity is very important for investment. He assured that the government would implement the national tariff policy without any changes, saying that exports cannot grow year on year and it will take time. Unemployment According to the economic survey, the number of unemployed increased from 4.5 million to 5.9 million, with the unemployment rate rising from 6.3% to 7.1%, highlighting the need to further accelerate job creation alongside the growth of the working population. The unemployment rate of 7.1% was the highest in 21 years. The survey showed that poverty in Pakistan hit an 11-year high of 29 percent, while income inequality hit its highest level in 27 years, as real incomes and people’s consumption fell over the past seven years. Poverty has increased significantly from 21.9% recorded in 2018-19, while income inequality has also widened, raising concerns about the inclusiveness of the country’s economic rebound. The survey showed that the national Gini coefficient, a key measure of income inequality, rose from 28.4 to 32.7 over the same period. But the finance minister said the government had ensured widespread economic recovery.
"We have achieved widespread recovery despite the conflict that has hit the region as well as the entire world." he elaborated. Performance of the FBR To the question regarding provincial subsidies to meet federal expenditure, the Finance Minister replied that the agreement with the provinces would be for a certain period and would last for more than a year. The three provinces, except Balochistan, have agreed to freeze their development spending to give at least Rs 900 billion to the Center for spending on defense and water sector projects. But this arrangement depends on the performance of the FBR. The minister said the meeting with Chief Minister Khyber Pakhtunkhwa regarding provincial grants was also productive and the four chief ministers assured their cooperation. However, KP financial advisor Muzzammil Aslam said the KP’s contribution was conditional on holding a meeting with party chief Imran Khan. Economic growth The finance minister said there was growth in all three sectors. "The livestock sector continues to grow stronger and stronger. Although we mainly focus on crops, the livestock sector is very important since dairy and livestock represent 60% of agricultural GDP."he added. Under industry and manufacturing, large-scale manufacturing (LSM) grew 6.1% in FY26 – the highest in the last four years. The manufacturing sector witnessed widespread growth, as out of 22 sectors, 16 showed a positive trajectory, he added. On the external front, he said that structural deficit has been Pakistan’s real problem for a very long time. "On the budgetary level, we posted a surplus and reduced the deficit."
"Remittances are and will remain a very important part of our external balance as we move forward."said Aurangzeb. Aurangzeb said exports were down due to two major factors, including the main food sector, where rice exports fell by $1.1 billion and sugar exports by $400 million. Overall, food sector exports declined by $1.5 billion. In terms of export growth in July-May FY26, the textile sector took the lead, where shipments of woven garments grew by 5%, home textiles by 3% and knitted garments by 3%.
