Pakistan economy shows stability as inflation, deficits ease: ministry

Pakistan’s economy remained on a stabilisation path during the first two months of FY26, supported by moderating inflation, industrial recovery and improved fiscal discipline, the finance ministry said in its Monthly Economic Update and Outlook for September 2025. The report highlighted stronger large-scale manufacturing, a narrowing fiscal deficit, and gains in external indicators.

According to the ministry, CPI inflation fell to 3.0% in August from 9.6% a year earlier, bringing the July–August average to 3.5% compared with 10.4% in the same period last year. LSM output grew 9% year-on-year in July, with textiles, automobiles and cement leading the expansion. Cement dispatches climbed over 20%, and auto production advanced across segments.

Fiscal accounts showed resilience, with the deficit contained at 0.2% of GDP and a primary surplus of Rs228.9 billion. Federal Board of Revenue collections rose 14.1% to Rs1.66 trillion over the two months. On the external side, exports rose 10.2% to $5.3 billion while remittances increased 7% to $6.4 billion. Foreign exchange reserves reached $19.8 billion by September 19, including $14.4 billion held by the State Bank.

The Pakistan Stock Exchange sustained its upward momentum, closing August at 148,617 points, reflecting improving sentiment. The outlook cites stable global demand and easing commodity prices as supportive but warns that flood-related supply disruptions could temporarily nudge food inflation higher, with overall inflation expected to remain in a 3.5–4.5% range in September.