Pakistan’s economy has entered a period of greater stability, according to Planning Minister Ahsan Iqbal, but the government now faces the bigger challenge of turning that stability into sustainable growth. Presenting the August Monthly Development Update, Iqbal said Pakistan economy indicators at the beginning of FY2026-27 were showing encouraging signs, particularly in inflation, remittances, exports, industrial activity and fiscal management.
Inflation Begins to Moderate
One of the most important developments highlighted in the report was the easing of consumer price pressures. CPI inflation fell to 9.2% in July 2026, compared with 11.7% in May. The government says it is closely monitoring prices through the National Price Monitoring Committee and is focusing on supply chains, commodity availability and administrative measures to protect consumers.
Although inflation remains a major concern for households, the moderation represents a positive development for the Pakistan economy. Lower price pressures can gradually improve household purchasing power and create a more predictable environment for businesses.
Remittances Strengthen the External Sector
Overseas Pakistanis continued to provide significant support to the country’s economy. Workers’ remittances reached $3.6 billion in July 2026, up 13% from $3.2 billion in the same month last year.
The latest figure follows a record $41.6 billion in remittances during FY2025-26. These inflows are important not only because they strengthen foreign exchange reserves but also because they provide direct financial support to millions of families across Pakistan.
For the Pakistan economy, sustained remittance growth can help reduce pressure on the external account and support overall economic stability.
Industrial Activity Recovers
Industrial performance also improved during the previous fiscal year. Large-Scale Manufacturing recorded average growth of 5.0% in FY2025-26, compared with a contraction of 0.7% during the previous year.
The improvement suggests that manufacturing activity has begun recovering after a difficult period. Stronger industrial production can contribute to employment, investment and exports, although maintaining this momentum will require reliable energy supplies, competitive costs and improved access to financing.
Exports and Imports Both Rise
Pakistan’s external trade also showed stronger activity at the beginning of FY2026-27. Goods exports increased by 9.4% year-on-year to $3 billion in July, compared with $2.8 billion a year earlier.
Exports of goods and services combined rose by 13% to $3.9 billion from $3.5 billion. At the same time, imports increased by 13% to $7.3 billion.
The rise in imports is not necessarily negative if it reflects greater demand for machinery, capital equipment and productive inputs. However, maintaining export growth will be essential if Pakistan wants to reduce external vulnerabilities.
Despite higher imports, the current account deficit narrowed to $328 million in July from $529 million in July 2025. This indicates that the external position remained relatively contained.
Fiscal Discipline Remains a Priority
The government also reported progress in revenue collection and fiscal management. Federal Board of Revenue tax collection increased 8.4% to Rs820.9 billion in July FY2026-27, compared with Rs757.4 billion during the corresponding period last year.
The fiscal deficit also declined substantially, falling to 2.6% of GDP in FY2025-26 from 5.4% in FY2024-25. According to Iqbal, this was the lowest fiscal deficit recorded in two decades.
Fiscal consolidation is particularly important for the Pakistan economy because persistent budget deficits can increase borrowing requirements and place additional pressure on public finances.
Development Spending and Job Creation
The Ministry of Planning authorised Rs211.327 billion under the Public Sector Development Programme during July, equivalent to 21.1% of the annual allocation.
The Central Development Working Party also reviewed 27 agenda items during the month. Several projects were approved, while others were forwarded to the Executive Committee of the National Economic Council for consideration.
Projects approved during July are expected to generate approximately 7,851 direct and 14,053 indirect jobs. The government also reported savings of Rs1.02 billion after reviewing development projects and removing non-essential components.
Such measures could improve the efficiency of public investment if project implementation remains timely and transparent.
URAAN Pakistan’s Next Challenge
Ahsan Iqbal said the country had already gone through a difficult period of economic adjustment. The next phase under URAAN Pakistan will focus on transforming macroeconomic stability into sustainable economic growth.
Exports are expected to play a central role in this strategy, with the government aiming to create more employment, improve incomes and expand opportunities for young people.
The latest figures provide reasons for cautious optimism, but sustained progress will depend on structural reforms rather than short-term improvements alone. Higher productivity, stronger exports, investment, industrial expansion and better management of public resources will be necessary to maintain momentum.
For the Pakistan economy, the real test is now whether recent stability can translate into long-term improvements in living standards. If the government can maintain fiscal discipline while encouraging investment and export-led growth, the current phase could become an important foundation for broader economic transformation.
