By Staff Reporter
ISLAMABAD: The finance ministry said on Thursday that the country’s external sector faces fresh risks from global uncertainties and supply disruptions tied to the Middle East conflict, even as a healthy primary fiscal balance and three straight months of current-account surpluses underpin domestic stability.
The warning came in the ministry’s Monthly Economic Update and Outlook for April 2026, which noted that “external demand may remain supportive in some markets but the balance of risk becomes less favourable than in a pre-war setting.” The ongoing conflict has introduced new uncertainties to the macroeconomic outlook, the report said, amid rising energy costs and potential disruptions to global commodity flows.
The ministry projected consumer-price inflation for April in a range of 8% to 9%, up from 7.3% in March, while still expecting the reading to stay within the government’s annual target band. Inflation has inched higher but remains contained, the report said, thanks in part to prudent fiscal management.
On the fiscal side, the primary surplus for the first eight months of the fiscal year reached 3.3% of gross domestic product, or 4.319 trillion rupees, compared with 3% (3.452 trillion rupees) in the same period a year earlier. The improvement reflected tighter expenditure control and steady revenue growth.
The Federal Board of Revenue collected 9.306 trillion rupees in taxes during July-March of fiscal 2026, a 10.1% increase from the prior year. Direct taxes rose 12.4%, while indirect taxes advanced 7.9%. Within indirect taxes, sales tax grew 8.5%, federal excise duty climbed 13.3% and customs duties rose 3%.
Net federal revenue for July-February increased 10.1% to 7.463 trillion rupees, with tax revenue up 10.6% and non-tax revenue up 7.7%. Total federal expenditure fell 10.9% to 9.232 trillion rupees, driven by an 11.4% drop in current spending that included a 25% decline in markup payments. The narrower fiscal deficit for July-February—0.1% of GDP, or 161.2 billion rupees, versus 2.2% (2.524 billion rupees) a year ago—underscored the government’s success in optimizing revenue and managing spending, the ministry said.
The economy ended its third quarter on a stable footing, the report said, supported by macroeconomic stability and gradually strengthening growth momentum. Large-scale manufacturing continued to expand, with broad-based gains in the automobile sector and higher cement dispatches signaling firmer domestic demand. The external accounts posted current-account surpluses for three consecutive months, helped by resilient remittances and rising information-technology exports.
The Bureau of Emigration and Overseas Employment registered 50,506 workers in March, down about 14% from 58,555 a year earlier. Despite the external headwinds, the ministry said key indicators have remained steady. “Based on this momentum, economic activity is expected to remain firm,” it said, though it cautioned that inflation would likely stay in the 8%-9% range for April because of lingering supply-chain constraints. The external position is likely to hold stable, the report added, “underpinned by higher remittance inflows and IT exports” even if Middle East tensions push up global commodity prices and disrupt supply chains. “Overall, the economy appears well-positioned to continue its growth trajectory, supported by the strengthening of macroeconomic fundamentals vis-à-vis appropriate and swift policy response to minimise the adverse impacts.”
The ministry noted that the conflict continues to reverberate through disrupted oil supply and pricing, adding volatility to global energy markets. Still, major trading partners such as the US are showing resilience, while Pakistan’s key export destinations—apart from China, which has seen persistent moderation—are operating near their long-term potential. The report highlighted recent milestones that bolstered external credibility: timely repayment of a Eurobond, a staff-level agreement with the International Monetary Fund and Fitch Ratings’ affirmation of a B- rating with a stable outlook.Suggested headlines:
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