Finance Division sees January inflation staying near 5-6%

Pakistan’s Finance Division has projected that inflation in January will likely remain within the 5% to 6% band, citing broadly steady macroeconomic conditions and improving headline indicators.

In its monthly Economic Update and Outlook, the ministry said the country finished the first half of FY2026 with relative stability, pointing to contained price pressures, improved large-scale manufacturing performance and stronger foreign exchange reserves.

The report noted consumer inflation at 5.6% year-on-year in December 2025, compared with 6.1% in the previous month, while the average inflation rate for July–December FY2026 was stated at 5.2% versus 7.2% in the same period a year earlier.

On the external side, the Finance Division highlighted resilient remittance inflows, while describing the Pakistan Stock Exchange as among the world’s stronger-performing markets during the period. It also cited gains in agriculture during the first quarter of FY2026 and improving output in major crops compared with the previous year’s sharper contraction.

Large-scale manufacturing was described as expanding, with the quarterly manufacturing index reaching its strongest level for the July–November window since FY2016. November 2025 was cited as posting double-digit year-on-year growth.

On public finances, the update said the government recorded a fiscal surplus in July–November FY2026, supported by growth in federal revenue receipts and an increase in both tax and non-tax revenues. It added that overall expenditure declined due to lower current spending, including reduced debt-servicing costs.

The Finance Division also reported that the current account posted a deficit in July–December FY2026, contrasting with a surplus in the comparable period last year. Exports were described as broadly flat year-on-year, while imports increased, widening the goods-and-services trade deficit.

Remittances were reported to have risen to $19.7 billion for July–December FY2026, led by stronger inflows from Saudi Arabia and the United Arab Emirates. Net foreign direct investment was described as lower during the same period.

Looking ahead, the ministry said the economy appears positioned to maintain growth momentum in FY2026, supported by improving high-frequency indicators, easing monetary conditions as inflationary pressures cool, and continued structural reforms. It also projected that remittances and services exports, including IT services, could help cushion external pressures even as the current account is expected to remain in deficit.