Geopolitical uncertainty, commodity volatility pose risks to growth: Finance Ministry

Pakistan’s Ministry of Finance has identified geopolitical uncertainty and global commodity price volatility as key downside risks to Pakistan’s improving economic outlook, even as macroeconomic indicators show recovery.

In its Economic Outlook for February, the finance ministry stated that growth would be supported by macroeconomic stability, easing inflation, fiscal consolidation and structural reforms. It added that an accommodative monetary stance and improved financing conditions are expected to reinforce business confidence and private sector activity.

The ministry said Pakistan entered the third quarter of FY26 with improved fundamentals, citing exchange rate stability, higher workers’ remittances and rising IT exports as factors supporting a manageable current account position.

Inflation is projected to be in the range of 6–7% for the month, and economic activity is expected to continue strengthening in FY26. Inflation has remained within the target range, while fiscal performance has improved, with surpluses in both fiscal and primary balances. 

The report also noted the early retirement of a portion of public debt and the announcement of a Rs38 billion Ramazan Relief Package.

Large-scale manufacturing (LSM) grew by 4.8% during July–December FY26, compared to 1.8% in the same period last year. The expansion was driven by automobiles, wearing apparel and coke and petroleum products, with 14 sectors recording positive growth.

Agriculture showed mixed trends. Wheat sowing during Rabi 2025-26 covered 23.1 million acres against a target of 23.8 million acres, with targeted production of 29.7 million tonnes. Urea offtake reached 2,744 thousand tonnes during October–January, up 12% from the previous year, while DAP offtake stood at 583 thousand tonnes.

Imports of agricultural machinery and implements rose 10.5% to $76.8 million during July–January FY26, compared to $69.5 million a year earlier.

The ministry said growth prospects have strengthened but cautioned that external risks, particularly geopolitical tensions and commodity price swings, could affect the trajectory.