Pakistan’s inflation is projected to stay within a range of 3.5% to 4.5% despite risks posed by recent heavy rains that may disrupt agricultural yields and supply chains, according to the Finance Division’s Monthly Economic Update & Outlook for July 2025.
For fiscal year 2025, the Consumer Price Index (CPI) averaged 4.5%, a notable improvement from last year’s 23.4%. In June 2025, year-on-year inflation stood at 3.2%, down from 12.6% in June 2024, while monthly inflation rose by 0.2%, following a decline in May.
The reduction in inflation was mainly driven by a 10.6% drop in perishable food prices and a 3.3% decrease in housing, water, electricity, gas, and fuel costs. However, inflationary pressures persisted in sectors like health (12.2%), education (10.1%), and clothing & footwear (8.9%).
Pakistan’s economy continued to show resilience with real GDP growth of 2.68% in FY2025. The agriculture sector rebounded, supported by a 16.6% increase in agricultural credit disbursements and a 20% rise in agricultural machinery imports. Crop offtake improved with a 20.1% increase in urea and DAP usage.
The country’s large-scale manufacturing (LSM) sector also showed recovery, posting a 7.9% month-on-month and 2.3% year-on-year growth in May 2025, driven by textiles, beverages, petroleum, and automobiles. Cement dispatches increased by 2.1% to 46.2 million tonnes in FY2025.
Externally, Pakistan recorded a $2.11 billion surplus in the current account, the first in 14 years, supported by record remittances of $38.3 billion and a 4.2% rise in exports. Foreign direct investment (FDI) grew by 4.7%, with notable inflows into the power and financial sectors.
On the fiscal front, Pakistan achieved positive results with the fiscal deficit narrowing to 3.7% of GDP, while tax revenues grew by 26.3% and non-tax revenues surged by 62.7% year-on-year. The policy rate was kept at 11% in June 2025, as inflation remained controlled and reserves stabilized.
Looking ahead, Pakistan’s economy is projected to grow by 4.2% in FY2026, with a continued focus on macroeconomic stability and structural reforms.
