Pakistan’s industrial growth slows to 3.51% in FY26 as energy, borrowing costs weigh on output

Pakistan’s industrial sector recorded provisional growth of 3.51% during fiscal year 2025-26, slower than last year’s pace, as high taxation, elevated energy prices, borrowing costs and policy uncertainty continued to affect industrial activity, according to the Planning Ministry.

The ministry said growth in the sector was supported mainly by large-scale manufacturing, which expanded 6.11% during the fiscal year despite mixed performance across different industries.

Production increased in food, tobacco, petroleum products, rubber products, electrical equipment, automobiles, transport equipment, furniture and football manufacturing.

However, overall industrial growth was constrained by contraction in the electricity, gas and water supply sector and relatively slower expansion in construction activity.

The electricity and gas sector contracted 10.63% during FY26, mainly because of a high base effect, lower energy subsidies and slower output growth by WAPDA and related companies.

According to the ministry, subsidies declined 25% to ₨893 billion from ₨1.2 trillion last year.

The construction sector grew 5.7% during the fiscal year, compared to 8.8% growth recorded last year, supported by higher construction-related spending by both the private sector and the government.

Meanwhile, mining and quarrying posted modest growth of 0.4%. The ministry said the increase in coal production was offset by lower output of natural gas, crude oil and other minerals.

The Planning Ministry noted that the industrial sector remained under pressure despite being one of the country’s largest contributors to tax revenues and employment.