By Staff Reporter
ISLAMABAD: Pakistan expects inflationary pressure to ease in the 2026-27 fiscal year after peaking near 12% in June, as the reopening of the Strait of Hormuz and a broader de-escalation in the Middle East help bring down global oil prices, the finance ministry said.
The Ministry of Finance, in its Economic Update and Outlook for June, said consumer price inflation was likely to have come in between 11% and 12% for the month, before easing further as the effects of a ceasefire between the United States and Iran feed through to global energy markets.
“With geopolitical tensions expected to ease following the US-Iran ceasefire, Pakistan’s economic outlook for FY27 is expected to improve further, supported by reform continuity, stronger confidence and a more enabling pro-business environment,” the ministry said.
Pakistan, a net oil importer, has been particularly exposed to the swings in global energy prices set off by the conflict between Israel, the United States and Iran earlier this year, which at one point closed the Strait of Hormuz, a chokepoint through which roughly a fifth of the world’s oil supply passes. The disruption pushed up fuel and transport costs and drove inflation back into double digits after more than a year of relative price stability.
With the ceasefire now holding and shipping through the strait resuming, the ministry said international crude prices had retreated from their recent highs, a shift it expects to filter through to lower fuel and transportation costs at home and to ease imported inflation over the coming months.
Lower oil prices are also expected to support Pakistan’s external position by containing the country’s import bill, the ministry said, adding to a balance-of-payments picture it described as strengthening on multiple fronts.
GROWTH AT FOUR-YEAR HIGH
The finance ministry said Pakistan was closing out the 2025-26 fiscal year, which ends this month, from a position of relative strength, with real GDP growth reaching 3.7%, the fastest pace in four years, and the size of the economy expanding to $452.1 billion.
That growth held up despite flood-related disruptions earlier in the fiscal year and bouts of volatility in global commodity markets, the ministry said, with expansion spread across agriculture, industry and services. Average inflation for the year as a whole remained in single digits and within the central bank’s target range, even as monthly readings climbed sharply during the period of the Middle East conflict.
The ministry pointed to large-scale manufacturing as a particular source of strength, alongside what it described as continued resilience in the agriculture sector and improved fiscal discipline.
On the fiscal side, the government said effective expenditure management, stronger revenue collection and surpluses run by the provinces had helped narrow the federal deficit and deliver a primary surplus equivalent to 3.5% of GDP over the first ten months of the fiscal year.
REMITTANCES, IT EXPORTS BUOY EXTERNAL ACCOUNT
The ministry said Pakistan’s external accounts had been underpinned by record workers’ remittances in May and continued growth in information-technology exports, flows it expects to keep reinforcing the balance of payments, supporting foreign exchange reserves and cushioning the economy against external shocks.
It described the exchange rate as broadly stable over the course of the fiscal year, alongside improved foreign currency reserves and import cover, and said these gains had been preserved even as the country absorbed the shock of higher global energy prices during the conflict.
Looking ahead, the ministry struck an optimistic note on the year ahead. “Overall, with geopolitical risks receding, global energy prices moderating, inflationary pressures easing and external buffers improving, Pakistan’s economic outlook remains favourable, with growth expected to strengthen while maintaining macroeconomic stability,” it said.
The ministry said prudent macroeconomic policies, continued fiscal consolidation and targeted support for productive sectors of the economy were expected to sustain growth in the new fiscal year without jeopardising the stabilisation gains achieved over the past year.
Pakistan has been operating under an International Monetary Fund programme as it works to rebuild reserves and shore up public finances following a balance-of-payments crisis in recent years. The finance ministry’s comments come as authorities look to translate a year of macroeconomic stabilisation into a more durable recovery, betting that a calmer external environment will give policymakers more room to focus on growth.
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