Pakistan posts strongest growth in four years despite tariffs, floods and Middle East conflict: Aurangzeb

ISLAMABAD: Finance Minister Muhammad Aurangzeb on Thursday said Pakistan’s economy demonstrated resilience during FY2025-26 despite global trade uncertainty, devastating floods and regional geopolitical tensions, achieving its strongest growth rate in four years.

Addressing the media after the launch of Pakistan Economic Survey 2025-26, he said the economy grew by 3.7 per cent, describing it as evidence of a broad-based recovery, though slightly below the government’s earlier expectations of crossing four percent.

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Aurangzeb said the year was marked by significant external pressures, including uncertainty linked to international tariff measures, which contributed to a slowdown in global growth forecasts from 3.3 per cent in 2025 to 3.1 per cent in 2026. Pakistan also faced floods in August and September, alongside regional conflict from March onwards, which disrupted economic activity.

He said these challenges tested Pakistan’s resilience but reaffirmed that the country remained on a path from stabilisation towards sustainable growth. He added that the economy had come a long way from a 0.2 per cent contraction in 2023, rising to 2.6 per cent in 2024, 3.2 per cent in 2025, and 3.7 per cent in FY2025-26.

Aurangzeb said there was a broad consensus earlier in the year that growth could exceed 4 per cent, but external shocks, particularly developments in the Middle East, prevented the target from being achieved. Despite this, he said Pakistan’s economy had reached its highest-ever nominal size at over $452 billion, while per capita income rose to $1,901.

He also said Pakistan was looking to strengthen its competitive position in the United States market by the end of July, despite continued global uncertainty. The government, he added, remains focused on macroeconomic stability, sustained growth and resilience against future shocks.

Sectoral recovery broad-based across economy

Aurangzeb said the recovery was visible across multiple sectors. Agriculture grew by 1.14 per cent, while livestock, accounting for nearly 60 per cent of agricultural GDP, also showed improvement.

He said manufacturing posted its strongest performance in four years, with 16 of 22 sub-sectors registering growth. Demand increased across key industries, including cement, mobile phones and other industrial goods, driving the expansion.

Services and digital economy strengthen growth

The services sector, which makes up 58.1 per cent of the economy, continued to provide key support to overall growth, while the digital economy emerged as a strong performer, with the information and communication sector expanding by 7.5 per cent.

Macroeconomic stabilisation indicators improve

Aurangzeb said several macroeconomic indicators showed improvement during the fiscal year. FBR tax revenues increased by 10.1 per cent, while inflation had eased significantly over the past two years, falling from 38 per cent levels.

He said the fiscal deficit had been reduced, while workers’ remittances increased strongly, reaching $4.2 billion last month. He stressed the need to further boost exports to sustain external account stability.

Fiscal discipline and structural indicators

The minister said fiscal consolidation efforts were reflected in a fiscal deficit of 0.7 per cent of GDP, while the primary surplus reached 3.2 per cent of GDP. The debt-to-GDP ratio also declined to 68.5 per cent.

He said the number of registered companies in Pakistan had crossed 300,000, while corporate profits rose by more than 20 per cent, indicating improving business confidence.

Aurangzeb also highlighted Pakistan’s growing engagement with international capital markets, saying the country had successfully launched Sukuk bonds, Panda bonds and other instruments in US and Chinese markets, with strong confidence from Chinese investors in Pakistan’s economic outlook.

Pakistan must adopt ‘test match’ approach for sustained growth: Ahsan Iqbal

Planning Minister Ahsan Iqbal said countries that have maintained a “test match” approach to sustained economic growth have achieved real and lasting development, stressing that Pakistan must also adopt long-term policy continuity instead of short-term fixes.

He said that without such consistency, countries are often forced to rely on assistance from friendly nations and institutions like the IMF, adding that this was not a matter of pride and Pakistan must work towards ending dependence on external support.

Iqbal noted that Pakistan continues to import agricultural inputs from abroad, while countries such as Vietnam have attracted higher levels of foreign direct investment. He said one of the country’s biggest economic setbacks has been the lack of continuity in policies, which has disrupted long-term planning and growth.

He said development cannot be achieved through short cycles, adding that Pakistan’s economic approach often resembles a T20 or even T10 game rather than a “test match” that requires patience, endurance and strategic consistency.

The minister further said that any government performing well should be given adequate time and opportunity to continue its policies, and called for a more balanced national discourse that recognises both challenges and achievements.

He urged stakeholders to look at progress with a “half-full glass” perspective, rather than focusing solely on shortcomings, in order to build confidence and stability in economic decision-making.

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