UN body projects Pakistan’s economic growth at 2.6% for FY26, 3.1% for FY27 

The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has projected Pakistan’s economic growth at 2.6% for the outgoing fiscal year 2025-26 and 3.1% for FY27 in its latest report titled Socioeconomic Prosperity amid the Transition to an Environmentally Sustainable Economy.

The report was launched on Wednesday at an event organised by the Sustainable Development Policy Institute.

Speaking at the ceremony, Pakistan’s Economic Adviser Dr Hassan Mohsin questioned the projections, saying provisional gross domestic product growth in the first half of FY26 stood at 3.9%, while large-scale manufacturing had recorded strong recovery.

He said the ESCAP estimates appeared conservative in light of current economic indicators.

According to the report, Pakistan reached a staff-level agreement with the International Monetary Fund for a $1.2 billion disbursement under the Extended Fund Facility and the Resilience and Sustainability Facility aimed at supporting economic stabilisation and climate resilience measures.

ESCAP said the latest tranche would raise Pakistan’s total IMF disbursements to around $3.3 billion.

The report noted that inflation in Pakistan declined from 23.8% in 2024 to 4.6% in 2025 due to the delayed impact of tight monetary policy, fiscal consolidation and improved crop supplies.

However, it said floods in June 2025 triggered renewed inflationary pressures by damaging crops, homes and infrastructure and displacing millions of people across affected areas.

ESCAP said Pakistan’s fiscal deficit narrowed to 3.2% of gross domestic product in FY25 compared to 4.5% a year earlier due to fiscal consolidation measures.

The report cautioned that reliance on indirect taxation and cuts in public investment could disproportionately affect lower-income groups and lower-skilled workers.

It added that long-term government borrowing costs remained elevated in Pakistan at around 12%.

ESCAP also highlighted a Sindh government solar energy initiative launched in 2019 with World Bank support, under which distributed solar systems had been installed in around 200,000 households, benefiting nearly 1.5 million people in off-grid areas.

The report said the programme had reduced reliance on kerosene and expanded electricity access in underserved communities.