Farooq Awan

Pakistan’s economy recorded a growth of 3.71 percent in the first quarter of fiscal year 2025–26, reflecting a broad-based recovery supported by improved performance across agriculture, industry and services, according to the Monthly Economic Update and Outlook released by the Finance Division for December 2025.

The report said the agriculture sector expanded by 2.89 percent during the quarter, supported by timely availability of key inputs such as certified seeds, fertilizers and agricultural credit. The government’s coordinated measures to ensure uninterrupted input supply helped stabilize farm activity and strengthen crop output during the early part of the season. Improved water availability and mechanisation also contributed to the sector’s overall performance.

Industrial activity recorded strong momentum, with the sector posting a growth of 9.38 percent. The recovery was led by large-scale manufacturing, particularly in textiles, automobiles, cement, food processing and petroleum products. According to the report, higher capacity utilization, improved energy availability and steady domestic demand played a key role in supporting industrial output during the period under review.

The services sector also showed steady expansion, growing by 2.35 percent in the first quarter of FY2026. Increased activity in trade, transport, communications and financial services contributed to the sector’s performance, reflecting a gradual normalization of economic activity across urban and commercial centers.

The report highlighted that Pakistan’s macroeconomic position strengthened further during the quarter due to improved fiscal management and external sector stability. The successful completion of the International Monetary Fund’s review under the Extended Fund Facility and the Resilience and Sustainability Facility resulted in the release of $1.2 billion, which supported foreign exchange reserves and strengthened market confidence.

Foreign exchange reserves rose to their highest level since March 2022, supported by steady remittance inflows and improved external financing. The report noted that remittances continued to play a critical role in supporting household consumption and stabilizing the balance of payments.

On the fiscal side, the government maintained prudent expenditure management while improving revenue mobilization. Enhanced tax collection and controlled spending contributed to better fiscal outcomes during the quarter, reinforcing overall macroeconomic stability.

Looking ahead, the Finance Division noted that the economic outlook remains cautiously optimistic. Continued reform implementation, stable macroeconomic policies and sustained support for productive sectors are expected to help maintain growth momentum in the coming months. The report emphasized that maintaining fiscal discipline, strengthening institutional capacity and managing inflationary pressures will be essential to ensuring durable and inclusive economic growth.

Credit: INP-WealthPk