Ayesha Saba

Pakistan showed early FY2026 stability with low inflation, higher revenues, strong remittances, and record market gains, but trade gaps and climate shocks still threaten recovery.

According to the latest Monthly Development Update issued by the Planning Ministry, available with Wealth Pakistan, inflation eased significantly, averaging 3.5 percent in July-August FY2026, compared to 10.4 percent in the same period last year.

Fiscal accounts also recorded progress, with the Federal Board of Revenue collecting Rs. 1,661 billion in the first two months of FY2026, a 14.1 percent increase over Rs. 1,456 billion in the corresponding period last year. August collections alone rose by 13.5 percent to Rs. 904 billion. Meanwhile, the fiscal deficit contracted sharply, falling by 32.5 percent to Rs. 261.5 billion in July 2025 compared to Rs. 387.8 billion a year earlier, amounting to just 0.2 percent of GDP.

The trade deficit widened by 29 percent to $6 billion in July-August FY2026 as imports jumped 14.2 percent to $11.1 billion, while exports edged up just 0.7 percent to $5.11 billion. Remittances rose 26.6 percent to $3.2 billion in July 2025. This, combined with improved inflows, helped narrow the current account deficit to $0.25 billion from $0.34 billion a year earlier.

Private sector credit rose 13 percent to Rs. 9,634 billion by mid-August, while agricultural lending jumped 36.9 percent to Rs. 232.3 billion. The KSE-100 surged 93.7 percent year-on-year to 148,618 points, reflecting strong investor confidence. FDI climbed 6.9 percent to $208.1 million in July, though higher outflows signaled persistent profit repatriation pressures.

Despite these gains, Pakistan’s vulnerability to climate change remains a pressing challenge. The severe monsoon floods of 2025 inflicted heavy human and economic losses across Khyber Pakhtunkhwa, Punjab, and Gilgit-Baltistan, echoing the catastrophic 2022 floods that displaced 33 million people and caused damages exceeding $30 billion.

These recurring disasters highlight the urgent need for integrated climate resilience within national development planning. Furthermore, the Central Development Working Party (CDWP), under the Planning Commission, convened in August 2025 to advance the government’s development agenda. The forum reviewed nineteen agenda items, including fifteen projects, three position papers, and one concept clearance proposal.

Of these, five projects, three position papers, and one concept clearance proposal were approved within the CDWP’s delegated financial authority. Nine high-value projects were recommended to the Executive Committee of the National Economic Council (ECNEC) for final approval, while one project was deferred for further refinement to ensure robust planning.

Credit: INP-WealthPk