ISLAMABAD, Sep 23 (APP):Pakistan’s economic performance continued to strengthen in fiscal year 2026 (FY2026, ended 30 June 2026), with growth accelerating to 3.7% from 3.2% in FY2025, the Asian Development Bank said in a report on Wednesday. The expansion was broad-based, supported by resilient services, a rebound in manufacturing, recovery in agriculture, and stronger private investment, although the Middle East conflict slowed economic activity in the final quarter of the …
ADB projects Pakistan’s FY2027 growth at 3.7% as sustained reforms, stronger external buffers support economic outlook
ISLAMABAD, Sep 23 (APP):Pakistan’s economic performance continued to strengthen in fiscal year 2026 (FY2026, ended 30 June 2026), with growth accelerating to 3.7% from 3.2% in FY2025, the Asian Development Bank said in a report on Wednesday.
The expansion was broad-based, supported by resilient services, a rebound in manufacturing, recovery in agriculture, and stronger private investment, although the Middle East conflict slowed economic activity in the final quarter of the fiscal year.
According to the Asian Development Outlook September 2026, Pakistan’s gross domestic product growth is projected to remain at 3.7% in FY2027.
Sustained implementation of economic reforms, improved external buffers, renewed access to international capital markets, and recent sovereign credit rating upgrades are expected to support investor confidence and private investment.
However, elevated energy prices and continued external uncertainty, including lingering effects of the Middle East conflict, are expected to constrain further acceleration in growth, it says.
“Pakistan’s economy has made progress in strengthening macroeconomic stability over the past two years, with stronger growth, improved external buffers, restored market confidence, and sovereign credit rating upgrades reflecting the benefits of sustained reforms”, said ADB Country Director for Pakistan Emma Fan.
“Maintaining reform momentum will be critical to unlock higher private investment, strengthen resilience to external shocks, and achieve stronger and more inclusive growth,” Fan added.
Growth in FY2026 was supported by expansion in manufacturing and services. Agriculture grew by 2.9%, despite flood-related losses to major crops, while private investment increased by 8.6% amid lower borrowing costs and improved business confidence.
According to the report, fiscal consolidation continued during FY2026 as the gross international reserves increased, strengthening external resilience.
Pakistan’s sovereign credit ratings were upgraded by S&P in July 2026 and Moody’s in August 2026, reflecting improved macroeconomic stability, stronger external buffers, and continued reform implementation. Pakistan also regained access to international capital markets through Eurobond and Panda bond issuances in April and May 2026.
Inflation averaged 7.1% in FY2026, compared with 4.5% in FY2025, as rising food prices and higher global oil prices intensified price pressures during the second half of the year.
Average inflation is projected to rise to 8.3% in FY2027, above the central bank’s medium-term target range of 5%–7%, as elevated energy, logistics, and agricultural input costs continue to affect domestic prices.
The outlook is subject to significant downside risks and an escalation of the Middle East conflict could increase energy import costs, intensify inflation, and disrupt labor markets in Gulf economies, affecting workers’ remittances, according to the report.
The reintroduction of austerity measures by Pakistan government could also weigh on domestic demand and economic activity, particularly if expenditure restraint is more pronounced than anticipated, posing an additional downside risk to the economic outlook.
Other risks include tighter global financing conditions, shortfalls in tax revenue, weather-related agricultural shocks, and delays in energy-sector and state-owned enterprise reforms.
Consistent implementation of reforms remains critical to reinforcing fiscal and external stability and sustaining investor confidence.
