Pakistan’s investment-to-GDP ratio remains at 14.4%, savings fall to 14% amid weak exports, higher borrowing

Pakistan missed its investment and savings targets during fiscal year 2025-26, with the investment-to-GDP ratio remaining unchanged at 14.4% and the savings-to-GDP ratio declining to 14%, according to provisional figures compiled by the Planning Ministry based on National Accounts data.

The investment ratio remained below the official target of 14.7%, while the savings ratio also fell short of the 14.3% target set for the fiscal year.

Officials said the figures reflected continued weakness in investment activity despite government efforts to attract foreign investment and improve economic activity.

According to the provisional estimates, the fixed investment-to-GDP ratio stood at 12.7%, below the official target of 13%, while private sector investment reached 9.6% of GDP against a target of 9.8%.

Public sector investment declined to 3.1% of GDP following a reduction of nearly ₨200 billion in the federal development budget during the fiscal year.

The government has proposed a ₨1.126 trillion development budget for the next fiscal year, although actual spending will depend on revenue collection performance.

Officials said exports declined by more than 6% during the first 10 months of FY26, increasing reliance on borrowing to meet financing requirements.

The report stated that Pakistan had also missed its annual economic growth target, with the economy expanding 3.7% during FY26.

The savings-to-GDP ratio declined by 0.9 percentage points compared to last year because of expectations of a current account deficit during the fiscal year.

The figures remain provisional and may be revised after final external sector data becomes available in July.

According to officials, internal discussions have also started on whether the government should proceed with the second phase of trade liberalisation from July after imports increased more rapidly than exports following earlier liberalisation measures.

The report noted that the Sovereign Wealth Fund, launched to attract foreign investment, remained inactive during the fiscal year because of objections raised by the International Monetary Fund regarding its legal framework.

The government has since introduced amendments in the National Assembly to address IMF concerns, although the Senate Standing Committee on Finance deferred consideration of the bill until its next meeting.

The report also stated that the Special Investment Facilitation Council had not succeeded in attracting major foreign investment inflows during the fiscal year, although it continued resolving procedural issues faced by investors.

According to the National Accounts Committee data, private investment in agriculture increased 8.7% because of imported machinery and livestock, while investment in information and communication rose 110%.

Investment in hotels and restaurants increased 12.8%, transportation and storage rose 6.2%, and electricity, gas and water supply recorded growth of 7.6%.

In the public sector, investment in manufacturing increased 97% mainly because of spending by the National Radio Telecommunication Corporation, while investment in mining rose 25.9% due to spending by Oil and Gas Development Company Limited.

Public investment in transport and storage increased 51.2% due to spending by the Civil Aviation Authority and Pakistan National Shipping Corporation.

Construction-related public investment increased 7.4%, driven by spending from the Lahore Development Authority, Gwadar Development Authority and the Federal Government Employees Housing Authority.