By Moaaz Manzoor

Pakistan's economy expanded to Rs126.9 trillion and crossed the US$452 billion mark in FY2025-26, reflecting growth across agriculture, industry and services amid improving macroeconomic stability, according to the Pakistan Economic Survey 2025-26 released by the Ministry of Finance.

The survey shows that the country’s gross domestic product (GDP) at current market prices increased to Rs126.9 trillion during FY2025-26, while the size of the economy in dollar terms reached US$452.1 billion.

According to the Ministry of Finance, the economy grew by 3.70% during FY2025-26, improving from 3.18% in the previous fiscal year despite challenges arising from floods, global uncertainty and regional geopolitical tensions.

The survey notes that growth was recorded across all major sectors of the economy, indicating a broad-based recovery after a period of economic stabilization.

Agriculture, which contributes 23.4% to national GDP, expanded by 2.89% during FY2025-26 despite flood-related disruptions in several parts of the country. The sector benefited from higher wheat output, improved production of other key crops, stronger livestock performance and continued support through agricultural financing.

According to the survey, wheat production increased by 4.3% to 29.61 million tonnes, while sugarcane output rose by 6.2% to 89.45 million tonnes and rice production increased by 2.8% to 9.99 million tonnes. The livestock sub-sector expanded by 3.75%, compared with 2.95% in 2024-25, and remained the largest component of agriculture’s value addition.

The industrial sector recorded growth of 3.51%, supported by a strong recovery in manufacturing activity. Large-scale manufacturing expanded by 6.11% after contracting in the previous fiscal year.

The survey highlights that 16 out of 22 manufacturing sectors reported positive growth during FY2025-26. Key sectors showing improvement included food, textiles, wearing apparel, coke and petroleum products, non-metallic mineral products, automobiles, beverages and electrical equipment.

Construction activity also strengthened, with the sector growing by 5.73% and contributing positively to overall industrial performance.

According to the report, the services sector remained the largest component of the economy and expanded by 4.09%. The sector accounted for 58.42% of GDP, supported by growth in wholesale and retail trade, transport and storage, information and communication, public administration, education, health and other private services.

The Ministry of Finance notes that improved macroeconomic conditions played a critical role in supporting economic expansion. The exchange rate remained stable, fiscal consolidation improved and external buffers strengthened. However, average CPI inflation during July-April FY2026 stood at 6.2%, compared with 4.7% in the same period last year, while inflation rose from 7.3% in March 2026 to 10.9% in April 2026 due to higher global oil prices and supply disruptions linked to the Middle East crisis.

Private investment emerged as one of the stronger indicators, increasing by 12.8% during FY2025-26. The survey notes that higher investment levels supported capital formation and provided a foundation for sustaining growth momentum in the coming years.

The external sector also contributed to economic stability. During July-March FY2026, workers’ remittances increased by 8.2% to US$30.3 billion, while ICT export remittances rose by 19.7% to US$3.38 billion. Tech freelancer exports, included in ICT services remittances, surged by 51% to US$856.3 million during the same period.

According to the survey, strong remittance inflows and growth in services exports helped support the external account and foreign exchange reserves despite rising imports associated with economic recovery.

The report highlights that the digital economy continued to expand during FY2025-26. Broadband subscribers increased to 161 million by March 2026, broadband penetration rose to 64.2%, telecom revenues reached Rs837 billion during July-March FY2026, and the 5G spectrum auction generated approximately US$509.6 million.

The survey also points to improvements in social indicators. Pakistan’s literacy rate improved from 61% in 2022-23 to 63% in 2024-25, while the proportion of out-of-school children declined from 38% in 2023 to 28% in 2025.

According to the Ministry of Finance, the economy’s expansion occurred despite significant climate-related challenges. The 2025 floods caused widespread economic and humanitarian damage, with total damages estimated at Rs822 billion, or US$2.9 billion. The disaster affected agriculture, infrastructure, housing and livelihoods across several regions.

The survey notes that continued economic growth remains essential for addressing challenges related to employment generation, poverty reduction, infrastructure development, service delivery and rising population pressures.

Pakistan’s population was estimated at 252.09 million in 2025, increasing demand for jobs, education, healthcare, housing and public services.

The Ministry of Finance emphasized that sustaining economic growth will require continued investment, productivity improvements, export competitiveness and human capital development.

With the economy reaching Rs126.9 trillion, or US$452.1 billion, FY2025-26 marked another step in Pakistan’s economic recovery, supported by improvements across major sectors and stronger macroeconomic fundamentals.

Credit: INP-WealthPk