Here is what the economic survey 2025-26 tells us

Every year, shortly before the federal budget is presented, the government releases the Pakistan Economic Survey. It is the official account of how the economy performed during the outgoing financial year.  Across the document, it records what happened to growth, inflation, agriculture, industry, employment, trade, public debt, energy, education, health and other major areas of the economy.

The Survey is not the budget, so it does not announce the taxes people will pay. Instead, it provides the economic backdrop against which those decisions will be made the next day. It tells us whether growth accelerated, whether inflation eased, whether exports improved, whether debt became more manageable etc.

But the document is always read, rightfully so, with a pinch of salt, simply as a collection of government numbers. It is after all the government’s preferred telling of the year that has passed. The headline figures, and the summary may show stability or recovery, no matter what the underlying tables reveal. 

By its very design, it does not highlight missed targets, but it does give you key insight into the vulnerabilities of the system. To make reading it easier, here are some of the most important takeaways from this year’s economic survey:

GDP grows but doesn’t meet expectations

According to the Pakistan Economic Survey 2025-26, real gross domestic product growth is estimated at 3.7% in FY26, up from 2.7% in FY25. That is a meaningful recovery, but it remains below the government’s original 4.2% target for the year. The economy has moved beyond near-stagnation, but the Survey does not show the rapid, investment-led expansion needed to raise living standards substantially.

“The improvement owes to effective macroeconomic management, a better fiscal account, growth in the large-scale manufacturing (LSM) sector, resilience of the agriculture sector to the floods of 2025, exchange-rate stability and reforms under the IMF Extended Fund Facility (EFF) programme,” it stated.

In his speech following the Economic Survey, FinMin Aurangzeb also pointed out that global growth had declined to 3.1% from 3.7% due to the volatility factors in the global political order in this past year.

The finance minister said Pakistan had recorded GDP growth of 3.7%, the highest in the past four years. He recalled that GDP growth stood at -0.2% in FY2023, 2.6% in FY2024 and 3.2% in FY2025.

However following are the patterns that should be looked at in more detail in the economic survey. Pakistan’s GDP grew however, general government consumption was the component of GDP that rose the most, increasing by over 18% as its contribution to GDP. Meanwhile, exports fell by 0.57% in the same regard, indicating a decline in their contribution to national GDP. This single little detail shows much about the number on paper that is showcased as “growth”.

Meanwhile, it is also important to point out that agriculture and industry grew by 2.8% and 3.5%, respectively, but the share of both sectors in GDP declined. The services sector, mainly “wholesale and retail” and “information and communication”, increased its contribution to GDP. In fact, agriculture’s share of GDP fell to its lowest level ever, contributing less than 23.5% to Pakistan’s economy.

All of this happened as Pakistan posed a record fiscal performance, which brings us to Pakistan’s fiscal position in this year.

Fiscal position was better than before

Pakistan’s fiscal deficit narrowed to just 0.7% of GDP during July-March, compared with 2.6% of GDP over the equivalent reporting period cited in the previous year’s Survey. Pakistan also recorded a primary surplus of 3.2% of GDP. 

The government attributes this improvement to expenditure control, stronger revenue mobilisation, provincial surpluses and continuing fiscal reforms. It is perhaps the clearest evidence yet that IMF-backed austerity has improved the government’s accounts.

According to the Pakistan Economic Survey 2025-26, total expenditure reached Rs15.66 trillion, exceeding total revenue of Rs14.80 trillion. Our total tax revenues stood at Rs10.17 trillion, representing an increase of 11.3%, and non-tax revenues reached Rs4.63 trillion, an increase of 9.5%. 

Meanwhile, our current expenditure rose to Rs14.27 trillion, marking an increase of 2.2%. Pakistan’s development expenditure and net lending also reached Rs1.83 trillion, surging by 18.7% from the previous year.

This sounds really good however, despite collecting record levels of both tax and non-tax revenue, development expenditure remained at 2.3% of GDP, the second-lowest level recorded over the past decade.

The external account is under pressure again

Pakistan recorded a current-account deficit of $252 million during July-April, compared with a $1.9 billion surplus in the same period of FY25. The trade deficit had already widened to $23.53 billion during July-March. The reversal is small in absolute terms, but its direction matters more. 

As domestic activity and imports recovered, and energy costs rose, the external cushion painstakingly built during the previous year began to narrow, and Pakistan which had bought itself room is starting to run out of it.

The shorter July-March snapshot showed a current-account surplus of $72 million, which is little compared to $2.1 billion in FY25. The financial account also improved, recording net inflows of $194 million during July-March FY2026, against a net outflow of $1 billion in the corresponding period last year. Higher official inflows helped build foreign exchange reserves to $21.8 billion by the end of March 2026. Together, the current- and financial-account developments strengthened external buffers and supported overall balance-of-payments stability.

But a stronger national balance sheet is not the same thing as a safer household economy, which is highly reliant on imported consumption. The state may have rebuilt a buffer, but ordinary Pakistanis remain dangerously close to the edge if external payments climb. The country’s defences are improving but the safety net beneath its citizens appears less capable of absorbing another shock.

The debt problem remains enormous despite the better fiscal deficit

Public debt stood at Rs83.285 trillion by the end of March 2026. This means stronger yearly fiscal performance has not yet translated into a substantially lighter debt burden. Pakistan may be borrowing more slowly, but it is still carrying the accumulated cost of past deficits, currency depreciation and high financing requirements.

The country may be borrowing more slowly, but it is still carrying the accumulated weight of past deficits, currency depreciation and persistently high financing requirements. 

Domestic debt reached its highest-ever level at more than Rs57.5 trillion, equivalent to nearly 50% of Pakistan’s total GDP. External debt, meanwhile, eased from its highest levels in FY25 and now stands at the equivalent of Rs25.5 trillion. Yet total public debt remains above 70% of GDP. The composition of it may be shifting, but the pressure has not disappeared.

Total public debt increased by 3.3% during the first nine months of FY26. The coming years will therefore bring heavy markup payments, even as the government’s focus on reducing external debt as a share of the total begins to show results. 

Pakistan is reducing one form of vulnerability while remaining trapped by the overall scale of what it owes, and the cost of that trap will continue to be felt most sharply by citizens in the coming year as short term external debts will expire.

Social Protection maintains a poor status quo

It is important to note that the Pakistan Economic Survey acknowledges that the past year was made more difficult by border escalations and conflict across the region. Geopolitical shocks travel quickly into domestic economies through fuel, freight, fertilizer and food prices and that is something Pakistan was a victim of. 

The United Nations Development Programme estimated that disruption in the Middle East could cost Asia-Pacific economies between $97 billion and $299 billion and push 8.8 million people into poverty.

However, the Economic Survey’s own classification makes the imbalance in priorities striking. Its largest category of “pro-poor expenditure” was spending on roads, highways and bridges, where expenditure rose by almost 70% to Rs566 billion. While infrastructure may support growth, describing it as the country’s largest pro-poor intervention exposes the thinness of direct investment in the essential services.

The improvement in tax revenue has not been converted into stronger protection for its people. Health and education expenditure both remain below 1% of GDP, at close to 0.8% each. Even after record tax collection and revenue growth of more than 10%, spending on health increased by less than 2%, while education expenditure rose by 9%, as a percentage of GDP. 

Pakistan also reduced the Public Sector Development Programme twice during the first nine months of the year, with external shocks playing a significant role. Development spending once again became the first line to be sacrificed when the fiscal position came under pressure. 

Pakistan enters this next period dangerously exposed. Poverty has already risen from 21.9% to 28.9% since 2019 as per the HIES, while 55% of the country’s remittances originate in the Middle East, the exposed region. 

With BISP serving more than 10 million households, the need is not simply for a larger safety net, but for one capable of responding quickly to shocks through digital and targeted support before temporary disruption hardens into long-term poverty.

The World Bank has warned that Pakistan’s earlier progress against poverty has reversed, with the national poverty rate reaching 25% by 2024 and many households remaining only marginally above the poverty line, vulnerable to the next economic disruption.

Yet the state continues to treat social protection and human development as residual spending: funded after the debts are serviced, the roads are built and the accounts are balanced.

Other important details

There were a number of positives to take away from the PES. Agriculture grew 2.89%, up from 1.53% the previous year, with the crop sub-sector and livestock both contributing positively, a creditable performance given that the year was not without its climate pressures.

Industry and Manufacturing Large-scale manufacturing expanded 6.1%, its strongest performance in four years, with broad-based gains across 16 of 22 sub-sectors, including a 10% rise in cement demand, 17% in fertiliser, 31% in automobiles, and 9% in mobile phones. The construction sector grew 5.73%. The services sector, comprising nearly 58% of GDP, grew 4.09%, also a four-year high, with IT and communication services leading at 7.52%.

External Sector Foreign exchange reserves climbed to multi-year highs at $20.6 billion, remittances rose 8.2% to $30.3 billion, and the KSE-100 gained 18.4%. IT exports crossed $3.8 billion, with freelancer earnings approaching $900 million.

Inflation and Poverty Inflation averaged 6.2% for July–April but spiked to 10.9% in April alone, driven by rising global oil prices and supply disruptions from the Middle East crisis. 

So Pakistan's macroeconomic stabilisation is not a fad, it is real. The question it has not yet answered is who it is stabilising for?