By Staff Reporter
ISLAMABAD: Pakistan voiced cautious optimism over the economic outlook in its latest monthly update, citing strengthening industrial activity and structural reforms even as inflation remains stubborn in the 5-6% range due to pressures on food prices and agricultural production.
In the economic update and outlook for November released on Friday by the Ministry of Finance, the report highlighted continued momentum supported by reforms, while noting a mixed crop outlook. The ministry hoped that “adequate input availability and government support measures” would stabilise supplies as the rabi season progresses.
Overall, the economy is projected to “maintain its positive momentum, supported by continued structural reforms, digital transition, governance improvements, on the back of ongoing efforts toward fiscal discipline and macroeconomic stabilisation,” the report said.
Key indicators showed improvement as “fiscal discipline was maintained through stronger revenue mobilisation and prudent expenditure management,” the ministry said, though expenditure growth of 11.9% outpaced revenue growth of 11.4%.
Higher remittances, an expanding large-scale manufacturing sector and IT exports “strengthened the economic outlook,” according to the report. Backed by healthy realisation of State Bank of Pakistan’s profits due to record interest rates, public debt declined by more than Rs1.371 trillion, marking the first quarterly reduction in more than five years. “This decline reflects strategic use of surplus funds for early retirement of costly debt, thereby reducing refinancing and rollover risks and strengthening macroeconomic stability,” the ministry noted.
The report comes against the backdrop of a current account deficit that swelled earlier in the month to $733 million during July-October of fiscal 2025-26 from $206 million a year earlier, an increase of 255.8%. Still, the ministry said the gap remained “within the expected range, on the back of steady export growth and strong remittance inflows despite the increase in import demand to meet the production requirements.”
All major fiscal indicators declined as a percentage of gross domestic product. The tax-to-GDP ratio slipped to 2.96% in the first four months from 3% a year ago, while non-tax revenues fell to 2.32% from 2.63%. The fiscal surplus narrowed to 1.63% from 1.65%, and the primary surplus eased to 2.7% from 2.8%.
In agriculture, sugarcane production for the current season is estimated to rise 0.6% to 84.74 million tonnes from 84.24 million tonnes despite floods. Cotton output is projected at 6.85 million bales, down 3.3% from 7.08 million bales, while rice production fell 3.2% to 9.41 million tonnes from 9.72 million tonnes. Maize output dropped 6.7% to 8.43 million tonnes from 9.03 million tonnes. Mung and chillies production rose 14.9% and 0.5% to 150,800 tonnes and 114,400 tonnes, respectively.
Agricultural credit disbursement climbed 18.6% to Rs845.3 billion from Rs712.8 billion. Imports of agricultural machinery and implements jumped 23.5% to $49.3 million from $39.9 million.
Large-scale manufacturing output increased 4.1% during July-September, with 15 sectors posting positive growth, including textile, wearing apparel, non-metallic mineral products, food, coke and petroleum products, electrical equipment, automobile and tobacco.
Service exports grew 15.9% to $3 billion, outpacing a 12% rise in imports to $4.2 billion, resulting in a service trade deficit of $1.2 billion versus $1.1 billion. IT exports advanced 19.6% to $1.4 billion.
During the first quarter of fiscal 2026, net federal revenues rose 2.4% to Rs4.117 trillion from Rs4.019 trillion. The Federal Board of Revenue’s collection increased 11.4% to Rs3.835 trillion in the first four months. On the expenditure side, total outlays climbed 11.9% during July-September to Rs2.779 trillion. The federal fiscal balance recorded a surplus of Rs1.338 trillion, down from Rs1.536 trillion. The primary balance posted a surplus of Rs3.497 trillion, up from Rs3.202 trillion.
Merchandise exports edged up 2% to $10.6 billion in the first four months but were outpaced by 9.6% growth in imports to $20.7 billion, widening the trade deficit 19% to $10.1 billion from $8.5 billion. Remittances rose 9.3% to $13 billion, led by inflows from Saudi Arabia with a 24.2% share and the United Arab Emirates at 20.7%. Net foreign direct investment inflows fell 26% to $747.7 million, with $226.7 million from China and $120 million from Hong Kong.
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