Pakistan Sets 4% Growth Target as Budget Pressures Mount

Pakistan’s economic planning body has approved a 4% growth target for the next fiscal year, setting a cautious direction for the national economy as the government prepares its upcoming budget. The decision was taken in Islamabad by the Annual Plan Coordination Committee, which also endorsed a higher inflation target and projected a widening external gap.

The committee approved the macroeconomic framework for fiscal year 2026-27 after reviewing the economy’s performance, fiscal space and external financing pressures. The 4% growth target is lower than the current year’s original goal of 4.2%, which the government was unable to achieve, reflecting continued pressure from weak exports, limited investment and heavy debt obligations.

According to the approved framework, inflation has been targeted at 8.2% for the next fiscal year, above the estimated average rate for the outgoing year. The government has also projected imports crossing $70 billion, while the trade deficit is expected to reach around $37 billion, largely to be covered through remittances and external inflows.

Planning Minister Ahsan Iqbal, who chaired the meeting, said Pakistan could not pursue growth by simply expanding imports and consumption. He argued that sustainable expansion must come through investment, exports and productivity rather than debt-driven spending, while also warning that reliance on loans and rollovers keeps the country tied to repeated IMF programmes.

The sector-wise targets show the government expects agriculture to grow by 3.8%, industry by 4%, large-scale manufacturing by 4.5% and services by 4.2%. Officials also estimate that around two million jobs could be created in the next fiscal year, with the services sector expected to contribute the largest share of new employment.

The external account remains a major area of concern. The current account deficit has been projected at 0.7% of GDP, or about $3.6 billion, compared with a much smaller estimated gap for the outgoing year. Exports are targeted at $32.8 billion, while remittances are projected at $42.3 billion, leaving the economy vulnerable if regional instability affects overseas workers’ income flows.

Pakistan has struggled for years to move beyond a low-growth cycle because higher expansion often triggers a surge in imports, pressure on foreign reserves and renewed balance-of-payments stress. Policymakers and international lenders have repeatedly warned that the country needs stronger domestic savings, investment, exports and non-debt foreign inflows to sustain growth without returning to crisis conditions.

The decision comes as the federal government faces a difficult budget season shaped by IMF commitments, subsidy debates, development spending pressures and demands for relief from businesses and citizens. A modest 4% target may be seen as realistic by economic planners, but it also underlines the limited room available for job creation, poverty reduction and industrial expansion.

For Pakistan’s economy, the approved framework signals a balancing act between recovery and restraint. The government will now have to translate these targets into budget measures, taxation decisions and development priorities, while the final test will be whether exports, investment and remittances can perform strongly enough to keep the economy stable without adding fresh external pressure.