Pakistan’s economy has stepped into the fiscal year 2025-26 with strong momentum and growing optimism. The finance ministry, in its Monthly Update and Outlook for August 2025, underlined that the gains achieved during FY2025 are setting the stage for a brighter future.
The report pointed out that continued reforms, improved investment policies, and private sector support have strengthened Pakistan’s economy. Easing inflation and a supportive monetary policy are also helping business confidence grow. Together, these factors are creating a positive outlook for the coming months.
Global trends have further boosted the momentum. Rising demand from international trading partners and a fresh trade agreement with the United States are expected to lift exports. In addition, steady inflows of remittances will help balance the impact of tariff rationalisation on imports.
Still, some challenges remain. The update warned that possible flood-related damages may put extra pressure on public finances and disturb food supplies. Inflation is expected to stay in the range of 4% to 5% in August 2025.
The Consumer Price Index (CPI) data showed a mixed trend. In July 2025, inflation rose to 4.1% year-on-year compared to 3.2% in June. However, it marked a sharp decline from the 11.1% recorded in July 2024. On a monthly basis, inflation grew by 2.9% in July, higher than the 0.2% increase noted in June.
The external sector gave further strength to Pakistan’s economy. The country recorded a narrower current account deficit in July FY2026, while the exchange rate stayed stable. These signs reflect resilience in external finances.
The Federal Board of Revenue (FBR) also posted strong growth in tax collection. This performance has reinforced confidence in the macroeconomic stability of Pakistan’s economy. International rating agencies took notice of these consistent improvements and upgraded the country’s sovereign outlook.
