Pakistan’s economic outlook cautiously optimistic despite rising geopolitical risks 

Pakistan’s near-term economic outlook remains “cautiously optimistic” despite rising geopolitical risks linked to the US-Israel conflict with Iran, according to the Ministry of Finance.

In its latest Economic Outlook, the ministry said inflation is projected to range between 7.5 percent and 8.5 percent in March 2026, while external account indicators suggest relative stability.

The current account posted a surplus of $427 million in February, bringing the deficit for July–February FY2026 to $700 million. The ministry said the external position remains manageable, although higher global oil prices could increase the import bill.

Exports of goods and services stood at $27.2 billion during the period, compared to $27.4 billion a year earlier. Goods exports reached $20.7 billion, largely driven by textiles, while services exports rose, supported by a 19.7 percent increase in IT exports to $3 billion.

Imports increased to $50.4 billion from $46 billion, widening the trade deficit in goods and services to $23.2 billion from $18.6 billion, mainly due to higher import volumes and a decline in food exports, particularly rice.

Remittances grew by 10.5 percent to $26.5 billion, with inflows primarily from Saudi Arabia and the UAE. Net foreign direct investment stood at $1.2 billion, with China and Hong Kong contributing the largest share, mainly in the power and financial sectors.

The ministry said economic activity is showing signs of improvement, supported by higher imports of textile machinery and construction inputs. It added that growth in IT exports and continued remittance inflows are supporting foreign exchange earnings.

In the agriculture sector, wheat production for the 2025–26 Rabi season is targeted at 29.7 million tonnes, compared to 28.4 million tonnes last year, with improved sowing reported. Agricultural credit disbursement increased by 11.1 percent to Rs1,649 billion in July–January FY2026, while imports of agricultural machinery rose by 17.1 percent to $90.8 million.

Fertiliser demand also increased, with urea offtake up 7.1 percent during the Rabi season and DAP offtake recorded at 685,000 tonnes.

The ministry said measures such as maintaining petroleum reserves, managing energy demand, and adhering to fiscal discipline are being pursued to manage risks. It added that ongoing reforms and domestic progress are expected to support medium-term growth, although global developments, particularly oil prices and supply disruptions, remain key risks.