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Aurangzeb Sees Economic Upside for FY27 After Iran War Ends
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Aurangzeb Sees Economic Upside for FY27 After Iran War Ends

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Finance Minister Muhammad Aurangzeb has expressed optimism about Pakistan’s economic outlook for fiscal year 2026-27 following the end of the Iran war, but said it is too early to revise the budget unveiled just days ago. In an interview with Reuters, the finance minister said the government had been assessing the possible economic consequences if the conflict had continued. However, he noted that damage to energy infrastructure would continue to affect supply chains for some time. Conflict Pushed Inflation Back Into Double Digits Aurangzeb said Pakistan had been closely monitoring the second- and third-order effects of the conflict.“We were looking at how we manage the second, third-order impact in case this conflict continues,” he said. He added that attacks on energy infrastructure disrupted supply chains and that restoring normal conditions would take time. The conflict had pushed inflation back into double digits, reversing the downward trend witnessed in recent months. Finance Minister Sees Upside to FY27 Projections Despite the challenges, Aurangzeb said he saw positive prospects for the coming fiscal year.“I do see upsides in what we have projected for next year,” he said. However, he emphasized that revising the budget at this stage would be premature. Pakistan’s federal budget for FY27, presented in Parliament last week, targets economic growth of 4 percent and inflation of 8.2 percent. The budget also increased defense spending by 18 percent to Rs3 trillion while aiming to maintain the country’s $7 billion International Monetary Fund (IMF) program through higher tax revenues. Pakistan May Shift Toward Commercial Borrowing The finance minister said Islamabad is considering commercial borrowing during FY27 to alter the country’s creditor profile without increasing external debt. He said the government wants to replace part of its bilateral borrowing with commercial financing. “Ideally what we want to do is to see if we can replace some of the bilateral through commercial,” Aurangzeb said. He stressed that Pakistan does not intend to increase the overall size of its external debt. Last month, Pakistan repaid $3.4 billion in deposits owed to the United Arab Emirates. At the same time, the country secured financing from commercial banks in the UAE, reflecting the government’s efforts to diversify its sources of funding. Plans for Panda Bonds and Eurobonds Aurangzeb said Pakistan intends to pursue several debt instruments to access international markets. These include Panda Bonds, Eurobonds, US dollar-denominated bonds and the country’s first rupee-linked, dollar-settled bonds. He said the size of these issues has yet to be finalized. The government believes broader access to capital markets could help improve debt management and strengthen investor confidence. Defense Export Potential Still Uncertain Interest in Pakistan’s defense industry has increased following last year’s conflict with India. The country’s fighter jets, drones and missile systems have attracted attention from potential international buyers after gaining combat experience. However, Aurangzeb said it remains too early to estimate how much the defense sector could contribute to exports. He avoided making projections regarding future defense-related revenues. Government to Regulate Crypto Before Taxing It Aurangzeb also highlighted Pakistan’s efforts to formalize the digital asset sector. The government has recently signed agreements with Binance and World Liberty Financial as part of its broader strategy to develop the sector. He said authorities would first establish regulations governing cryptocurrencies, tokenization and digital asset exchanges before imposing taxes. According to the finance minister, taxation would follow once the sector becomes properly formalized. The move reflects the government’s efforts to create a regulated framework that encourages innovation while ensuring compliance and transparency.

Service Long March Tyres Makes History with Pakistan’s Largest-Ever IPO
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Service Long March Tyres Makes History with Pakistan’s Largest-Ever IPO

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Karachi, June 15, 2026: In a historic achievement for Pakistan’s Industrial and Manufacturing sector, Service Long March Tyres Limited (“SLM”) has successfully completed its Initial Public Offering (“IPO”), receiving an overwhelming response from investors during both the Book Building and General Public subscription phases. SLM, Pakistan’s largest Truck and Bus Radial (“TBR”) tyre manufacturer listed on the Pakistan Stock Exchange (“PSX”), has established new benchmarks in the country’s capital markets, reflecting exceptional investor confidence and unprecedented participation. The IPO attracted approximately 35,565 applications across the Book Building and Retail segments, marking the highest investor participation in the history of Pakistan’s IPO market. The transaction raised PKR 7.78 billion, making it the largest IPO ever undertaken in Pakistan. The Book Building portion, initially comprising 292,303,528 ordinary shares, was fully subscribed within just five seconds and was oversubscribed by 16.7 times. The Retail portion, comprising 97,434,510 ordinary shares, was oversubscribed by 7.6 times and attracted approximately 33,190 applications from investors nationwide. Owing to the strong demand from retail investors, a 5% reallocation of shares was made from the Book Building portion to the Retail portion in accordance with the applicable regulations. The overwhelming response underscores the increasing depth, maturity, and growing participation of investors in Pakistan’s equity capital markets. The offering comprised a total of 389,738,038 ordinary shares, representing 5% of SLM’s post-IPO paid-up capital. The IPO floor price was set at PKR 14.25 per share. Following robust demand during the Book Building process, the strike price was successfully discovered at PKR 19.95 per share. Consequently, the transaction size increased to PKR 7.78 billion from PKR 5.55 billion at the floor price. The SLM IPO witnessed participation from a diverse range of institutional and individual investors, including commercial banks, mutual funds, development finance institutions, insurance companies, investment banks, pension and employees’ funds, brokerage houses, high-net-worth individuals, foreign investors, and retail investors, highlighting broad-based confidence in SLM’s business fundamentals, growth prospects, and the future of Pakistan’s manufacturing sector. An important highlight of the occasion was the participation of Senator Muhammad Aurangzeb, Federal Minister for Finance and Revenue, Government of Pakistan, who attended the Gong Ceremony held to commemorate the successful listing of Service Long March Tyres Limited on the Pakistan Stock Exchange. Addressing the ceremony, the Finance Minister acknowledged the significance of the transaction for Pakistan’s capital markets and manufacturing sector, and emphasized the importance of encouraging greater private sector participation in the capital market to support economic growth, industrial development, and investment mobilization in the country. Arif Habib Limited acted as the Lead Manager and Book Runner to the Issue and played a pivotal role in the successful execution of the transaction. Mr. Muhammad Aurangzeb, Honorable Federal Minister for Finance & Revenue, remarked: “The budget presented last week sets a clear direction towards sustainable, export-led growth. The listing of SLM is a proud milestone, built during the peak of COVID with Chinese expertise and investment, and now on track to achieve USD 100 million in exports next year. With 11 IPOs this fiscal year, investor confidence is ringing loudly from PSX. Service Long March is already among the most profitable tyre companies globally, proving that Pakistan can deliver industrial growth with an export-led model. I have personally followed this project since its inception, and I am proud to see it reach this stage. This IPO is a strong vote of confidence in Pakistan’s economy and its future trajectory, and I encourage the leadership of Long March to bring more ventures from Liaoning and Chaoyang to Pakistan, where the Government stands ready to support and facilitate further investment.” At the listing ceremony, Mr. Farrukh H. Sabzwari, Managing Director & CEO of PSX stated: “Today’s Gong Ceremony is a landmark occasion for Pakistan’s capital market. This listing comes at a time when Pakistan has just presented a positive federal budget, offering relief to the salaried class, reducing super-taxes, and introducing incentives for housing and business. These measures, alongside today’s IPO, will boost investor sentiment and strengthen the market outlook. Despite global challenges, our markets remain resilient, with PSX touching PKR 21 trillion market capitalization, average daily trading value PKR 57 million and the third highest number of IPOs in 25 years — with double-digit listings last seen in FY05, FY06 & FY07. This fiscal year alone, we have recorded more than 563,000 unique investor numbers (UINs), with Millennials and Gen Z driving participation through investor awareness sessions and education initiatives. The IPO of SLM is record-breaking, raising billions and attracting both institutional and retail investors. The Book Building tranche was oversubscribed multiple times, while retail participation was overwhelming, with 33,190 applications received nationwide. This demonstrates not only investor confidence in SLM’s fundamentals but also the resilience of Pakistan’s equity markets. Transparency, timely disclosures, and strong governance will ensure continued investor trust and sustained performance. We are proud that Pakistan’s capital markets remain among the best-performing frontier markets globally, with returns of 8.13% in USD terms since inception, and ranking among the top markets over the past one, three and five years. Our fundamentals remain strong, and our focus is clear: expanding the investor base and encouraging more listings through platforms such as IPO roundtables and other awareness initiatives.” Mr. Ali Farid Khwaja, SECP Commissioner added: “This is a special day for Pakistan as we celebrate both the success of CPEC and the listing of SLM. The IPO set records in demand and subscription, reflecting strong investor confidence. SECP is committed to enabling more companies to list and supporting PSX’s ambitious target of expanding the investor base fivefold to 2.5 million investors in the coming years. We congratulate SLM and its Chinese partners on this achievement, and assure our continued support for Pakistan’s capital market growth. The collaboration between regulators, PSX, and market participants is what makes such milestones possible, and we look forward to more listings that strengthen our financial ecosystem. Today’s ceremony is a reminder of how Pakistan’s capital markets can serve as a bridge for industrial growth and international cooperation.” Mr.

Pakistan Energy Crisis Deepens as Rising Fuel Prices Push Shift Towards Solar and Electric Vehicles
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Pakistan Energy Crisis Deepens as Rising Fuel Prices Push Shift Towards Solar and Electric Vehicles

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Pakistan is once again facing the economic consequences of rising global energy prices as tensions around the Strait of Hormuz increase concerns about inflation and energy security. The latest increase in petroleum prices has added pressure on households and businesses. According to the Pakistan Bureau of Statistics (PBS), headline inflation reached 11.7% year-on-year in May 2026, marking the highest level since June 2024. For millions of Pakistanis, expensive fuel means higher costs for almost everything. “When petrol becomes expensive, everything becomes expensive,” said Jabbar Khan, a father of nine. He recalled that a decade ago, his family could buy monthly groceries for Rs12,000 to Rs15,000. Today, even spending up to Rs20,000 only fills a single shopping bag. Rising Fuel Costs Affect Daily Life The impact of higher fuel prices has spread beyond transportation. Research by the Pakistan Institute of Development Economics (PIDE) shows that expensive fuel raises transportation and distribution costs. As a result, businesses increase prices, pushing up the cost of food, consumer goods and essential services. Many families are struggling to cope. Saleem Abdullah said earning enough money for basic meals has become increasingly difficult. Transportation expenses now consume a larger share of his daily income. Similarly, Islamabad-based painter Musa Khan, who earns around Rs25,000 a month, said he faces difficult choices every month. “I don’t know whether to pay the electricity bill, the gas bill, or manage household expenses,” he said. Heavy Dependence on Imported Energy Creates Risks Analysts believe Pakistan’s dependence on imported fuel remains one of its biggest economic vulnerabilities. Muhammad Faran Khan, Associate Director at KTrade Securities, said around 80% to 85% of Pakistan’s energy imports come from Gulf countries and pass through the Strait of Hormuz. He noted that higher oil prices have increased the country’s import bill and put additional pressure on foreign exchange reserves. At the same time, rising transportation, food and housing costs have reduced the purchasing power of ordinary citizens. Pakistan’s domestic oil and gas production has declined over the years. The country also faces challenges such as circular debt, inadequate fuel reserves and inefficiencies in the energy sector. Experts say these structural weaknesses continue to expose Pakistan to external shocks. Solar Power Emerges as a Popular Alternative As fuel and electricity costs rise, more consumers are turning to renewable energy. Pakistan has become one of the fastest-growing solar markets in the world. Falling prices of solar equipment, particularly Chinese-made photovoltaic panels, have encouraged households and businesses to install rooftop systems. According to the Institute for Energy Economics and Financial Analysis (IEEFA), rooftop solar now contributes nearly one-quarter of Pakistan’s electricity supply. Experts believe expanding solar, wind and hydropower generation can reduce the country’s dependence on imported fuels. Aslam Shah, who spends a large part of his income on transport and utility bills, sees solar energy as a practical solution. “Solar feels like a better solution because it becomes your own source of power,” he said. Business owners are also embracing renewable energy. Faizan Obaid, an event planner in Islamabad, said transportation and electricity have become major operating costs. “Solar clearly looks like a much more reasonable option,” he said. Electric Vehicles Gain Popularity The search for alternatives is also transforming Pakistan’s automobile sector. Muhammad Aurangzeb, an Islamabad-based auto electrician, recently converted a Suzuki Mehran into a fully electric vehicle capable of travelling more than 220 kilometres on a single charge. “With petrol becoming so expensive, EVs are now the only practical alternative for many people,” he said. Mechanic Shakeel Ahmad, who has more than 20 years of experience, said customer preferences have changed significantly. “People are now moving away from large-engine vehicles and searching for EVs and hybrid cars,” he said. China Cooperation Could Accelerate Transition Analysts believe growing cooperation with China could help Pakistan speed up its transition towards electric mobility. Chinese automakers and battery manufacturers are increasing their presence in Pakistan through assembly projects and technology partnerships. Experts say local manufacturing could lower prices, create jobs and strengthen the country’s automotive industry. Muhammad Faran Khan said even limited transfer of Chinese manufacturing capacity could provide major economic benefits. Energy Security Becomes a Household Priority The latest fuel-price surge highlights how global events continue to affect Pakistan’s economy and daily life. As inflation rises and imported energy becomes more expensive, many Pakistanis are taking energy security into their own hands. From rooftop solar systems to electric vehicles, ordinary citizens are increasingly looking for ways to reduce dependence on costly imported fuels and protect themselves from future energy shocks.

Pakistan Gives Tax Concessions of Rs2.35 Trillion to Elite Equal to $8 Billion
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Pakistan Gives Tax Concessions of Rs2.35 Trillion to Elite Equal to $8 Billion

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ISLAMABAD: Pakistan’s cost of tax concessions and exemptions declined marginally by 3.3% to Rs2.35 trillion in the current fiscal year, mainly due to withdrawal of several sales tax exemptions and zero cost impact from bilateral free trade agreements, according to the Economic Survey 2026. The total tax expenditure stood at Rs2.43 trillion in the previous fiscal year, showing a net reduction of Rs82 billion. In dollar terms, however, the burden still equals around $8.5 billion, nearly matching the foreign inflows Pakistan received in recent bilateral support arrangements. Sales Tax Exemptions Remain Dominant Pressure Point Sales tax exemptions remained the single largest contributor to revenue losses, rising slightly to Rs1.27 trillion from Rs1.24 trillion last year. This category alone accounts for 54% of total tax expenditures, highlighting structural weaknesses in the indirect tax system. Within this segment, exemptions under the Sixth Schedule fell to Rs567 billion from Rs703 billion, reflecting IMF-linked withdrawal of zero-rating and exemptions on both local and imported goods. However, reduced tax rates under the Eighth Schedule surged sharply to Rs635 billion, up 70% year-on-year. The government is expected to further rationalise these reduced rates in the upcoming budget, with the IMF pushing for alignment toward the standard 18% sales tax regime and a possible increase of concessional slabs from 5% to 10%. Income Tax Reliefs Edge Higher, Customs Duties Fall Sharply Income tax exemptions rose to Rs580 billion from Rs545 billion, driven mainly by higher sectoral concessions and reduced tax rates, even as exemptions on allowances and credits showed mixed declines.Customs duty exemptions, however, fell significantly by 24% to Rs499 billion, reflecting withdrawal of concessions across key sectors including automobiles, oil and gas exploration, and CPEC-linked imports. Notably, free trade agreement-related exemptions dropped to zero from Rs61 billion, marking a structural shift in tariff policy under ongoing fiscal consolidation efforts. Despite the reduction, large exemptions under the Customs Act’s Fifth Schedule and sector-specific concessions continued to weigh heavily on revenue mobilisation.

Pakistan Energy Transition Powers a Green Revolution as Solar Boom Reshapes the Economy
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Pakistan Energy Transition Powers a Green Revolution as Solar Boom Reshapes the Economy

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Pakistan Energy Transition has reached a defining moment. For decades, the country’s electricity system depended heavily on imported fuels and costly thermal generation. Today, the balance of power is changing dramatically. According to the Pakistan Economic Survey FY26, the country has entered a new era in which clean and indigenous energy sources now dominate the national electricity mix. The shift is not merely statistical. It represents a strategic economic transformation capable of shielding Pakistan from global oil shocks while building long-term energy security. Pakistan Energy Transition Ends Thermal Power’s Reign Pakistan’s total installed electricity generation capacity expanded by 8.5 percent to 49,651 MW by March 2026. What makes this milestone extraordinary is where the growth came from. For the first time in Pakistan’s history, hydropower, nuclear energy, renewable sources, and solar net-metering collectively account for 53.1 percent of electricity generation capacity. Thermal power, once the undisputed backbone of the system, has fallen below the halfway mark. Thermal generation capacity now represents 49.2 percent of installed capacity compared with 56.7 percent previously. The decline signals a decisive move away from imported fossil fuels that have long burdened Pakistan’s foreign exchange reserves. The real game changer has been rooftop solar. Consumer-driven solar net-metering contributed an astonishing 7,319 MW to the national grid. Households and businesses are no longer passive consumers. They are becoming electricity producers, fundamentally changing the country’s energy landscape. Solar Revolution Gives Consumers New Power The explosive growth of solar adoption reflects both necessity and opportunity. Faced with rising electricity tariffs, consumers increasingly turned toward solar systems to control costs and reduce dependence on conventional supply. The result is one of the fastest grassroots energy transitions in the region. During the first nine months of FY26, Pakistan generated 92,835 GWh of electricity. Sustainable energy sources played a leading role in meeting this demand. Thermal sources generated 43,581 GWh, maintaining the largest single contribution. Hydropower followed strongly with 27,961 GWh, highlighting the importance of indigenous water resources. Nuclear facilities produced 17,133 GWh, while renewable sources, including net-metered solar systems, contributed 4,160 GWh. The numbers tell a compelling story. Pakistan’s future energy growth is increasingly being driven by cleaner and domestically available resources. Pakistan Energy Transition Changes Consumption Patterns Electricity consumption rose by 3.8 percent to 83,143 GWh during the reviewed period. Households remained the largest electricity users, accounting for nearly 48 percent of national consumption. However, this share declined slightly as consumers responded to higher tariffs through conservation measures and solar installations. Industrial activity showed renewed momentum, absorbing 32 percent of electricity consumption as manufacturing demand recovered. Commercial users represented 8 percent of usage. Agricultural consumption declined sharply to 3 percent as farmers increasingly adopted solar-powered tube wells. Government and public sector categories accounted for the remaining 9 percent. These changing patterns indicate that efficiency and self-generation are beginning to reshape demand across sectors. Future IPPs Signal a Cleaner Energy Future Pakistan’s investment pipeline suggests the green transition is far from over. The Private Power and Infrastructure Board currently oversees 90 operational Independent Power Producers with a combined capacity of 20,769 MW. Even more revealing is the composition of the upcoming 6,536 MW project pipeline. Hydropower dominates future investments with 4,564 MW, representing 70 percent of planned capacity additions. Thar coal projects account for 1,320 MW to support grid stability using indigenous resources. The remainder includes 300 MW from imported coal and another 300 MW from solar and wind projects. The message is unmistakable. Future investments increasingly favour domestic and lower-cost energy sources. Transport Fuels Still Drive Petroleum Demand Despite progress in electricity generation, Pakistan’s petroleum sector remains heavily influenced by transportation needs. Petroleum consumption reached 13.64 million metric tonnes during July-March FY26, increasing by 3.5 percent year-on-year. The transport sector absorbed 82.5 percent of total petroleum demand. Motor Spirit consumption stood at 5.78 million tonnes, closely followed by High-Speed Diesel at 5.36 million tonnes. Furnace Oil usage continued its gradual decline as power producers shifted toward coal, hydropower, and alternative sources. The trend suggests that while electricity generation is becoming greener, transportation remains a major challenge in the country’s energy transition journey. Gas and Coal Continue Supporting Energy Security Natural gas continues to play a vital role, accounting for approximately 29.3 percent of Pakistan’s primary energy supply. Average gas consumption reached 2,929 MMCFD, including 613 MMCFD of imported RLNG to address domestic supply gaps. Meanwhile, indigenous coal usage expanded significantly. The power sector consumed 12,758.3 thousand metric tonnes of coal, representing nearly 60 percent of total national coal demand. Although coal remains controversial from an environmental perspective, the use of local resources reflects Pakistan’s broader objective of reducing dependence on expensive imports. A Turning Point for Pakistan’s Economy Pakistan Energy Transition is no longer a distant policy ambition. It is unfolding in real time. The rapid rise of solar energy, expanding hydropower investments, growing nuclear generation, and the strategic use of indigenous resources are collectively rewriting the country’s economic future. Challenges remain. Grid modernization, storage solutions, and transport sector reforms will determine how successful this transition becomes. Yet one reality is clear. Pakistan is moving from an era defined by imported fuel dependence toward a future powered increasingly by its own resources. If managed wisely, this transformation could strengthen energy security, improve economic resilience, and redefine the nation’s development trajectory for decades to come.

Pakistan Inflation 2026: Why Rising Energy Costs Are Threatening Price Stability Again
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Pakistan Inflation 2026: Why Rising Energy Costs Are Threatening Price Stability Again

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Pakistan Inflation 2026 is once again becoming a major concern for households, businesses, and policymakers despite earlier signs that price pressures were coming under control. The latest findings in the Economic Survey 2025-26 reveal that inflation is no longer being driven primarily by domestic demand. Instead, rising global energy costs, geopolitical tensions, and external commodity shocks are emerging as the biggest threats to Pakistan’s economic stability. While inflation remains far below the crisis levels seen in previous years, recent trends suggest that the battle against rising prices is far from over. Pakistan Inflation 2026 Climbs Despite Controlled Domestic Demand According to the Economic Survey, average consumer inflation stood at 6.2 percent during July-April FY2026, compared with 4.7 percent during the same period last year. The increase was largely linked to higher international energy prices and statistical base effects rather than excessive consumer spending. Policymakers argue that underlying inflationary pressures remained relatively contained for most of the fiscal year. However, the latest figures show that external developments are increasingly influencing domestic prices, creating fresh challenges for economic managers. The April Inflation Shock That Alarmed Markets One figure grabbed headlines across the country: 10.9 percent inflation in April 2026. At first glance, the jump appeared alarming. However, economists point out that April 2025 recorded an unusually low inflation rate of just 0.3 percent, making year-on-year comparisons appear significantly higher. Even so, the April surge exposed a growing problem. Non-food inflation climbed close to 14 percent in both urban and rural areas, driven by rising fuel costs, electricity tariffs, transport charges, and production expenses. Core inflation, which excludes volatile food and energy prices, painted a less dramatic picture. Urban core inflation increased modestly to 8 percent, while rural core inflation actually eased to 8.5 percent. The data suggests that imported inflation rather than excessive local demand is becoming the dominant factor behind rising prices. Pakistan Inflation 2026 Shows Sharp Differences Across Sectors Not all sectors experienced inflation equally. The strongest increase came from the Miscellaneous category, where prices surged 18.4 percent, highlighting rising costs for various consumer services. Education costs increased by 9.8 percent, placing additional pressure on middle-income families. Transport prices rebounded sharply to 7.2 percent after experiencing deflation a year earlier. Housing, electricity, gas, and fuel costs also remained elevated, recording inflation of 7.3 percent. Given that this category represents nearly one-quarter of the consumer basket, its impact on household budgets is substantial. Interestingly, food prices provided some relief. Perishable food items recorded a significant 7.9 percent decline, reflecting improved supply conditions and favorable seasonal trends. Communication costs also remained largely stable, while recreation and cultural services recorded outright deflation. Rural Pakistan Faces a New Inflation Reality A notable shift has emerged in rural inflation trends. Historically, food prices were the primary driver of inflation in rural areas. That pattern is changing. Rural inflation averaged 6.1 percent, nearly double last year’s level. However, rising costs are increasingly being driven by non-food factors such as energy, transportation, utilities, and essential services. This change signals a deeper structural challenge because energy-related inflation tends to persist longer and affects nearly every sector of the economy. Global Energy Crisis Becomes Pakistan’s Biggest Risk The most significant threat to Pakistan Inflation 2026 originates outside the country’s borders. The escalation of conflict in the Middle East during February 2026 disrupted global energy markets and increased uncertainty surrounding the Strait of Hormuz, one of the world’s most critical energy transit routes. Nearly one-third of global oil shipments and a significant share of LNG exports pass through the waterway. As tensions intensified, international energy prices surged. Global forecasts indicate energy commodity prices could rise by approximately 19 percent during 2026. Oil prices are expected to average around $82 per barrel, while several key commodities have already recorded dramatic increases. Crude oil prices jumped nearly 78 percent year-on-year. Urea prices surged over 121 percent, while soybean oil prices climbed 45 percent. For Pakistan, which relies heavily on imported petroleum products, LNG, edible oil, and industrial raw materials, these increases pose a direct threat to fuel prices, electricity tariffs, transportation costs, and food inflation. Government Moves to Prevent Another Inflation Crisis Recognizing the growing risks, the government has introduced several measures aimed at limiting the impact of rising global prices. Authorities established the Prime Minister’s Austerity Fund 2026 and rolled out targeted subsidies for motorcycles, public transport operators, and freight services. Regulatory bodies including the Economic Coordination Committee, National Price Monitoring Committee, and Competition Commission maintained close oversight of markets throughout the year. Provincial governments also intensified enforcement efforts, conducting millions of inspections to curb profiteering and prevent artificial shortages. Inflation Risks Remain Elevated The Economic Survey concludes that Pakistan’s inflation outlook remains highly sensitive to global developments. Future price trends will largely depend on energy markets, geopolitical stability, exchange rate movements, and domestic supply conditions. While inflation remains manageable compared with previous crisis periods, the recent spike serves as a warning that Pakistan’s economic recovery remains vulnerable to external shocks. If global oil prices continue rising and regional tensions persist, Pakistan Inflation 2026 could become one of the country’s most important economic challenges in the months ahead.

Trade deficit widens due to increased imports as economy gathers pace
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Trade Deficit Widens Due To Increased Imports As Economy Gathers Pace

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KARACHI: Pakistan’s current account surplus narrowed sharply during FY26 as a recovery in economic activity fuelled higher imports, underscoring the delicate balance between growth and external sector stability. According to the Pakistan Economic Survey 2025-26, the current account recorded a surplus of just $72 million during July-March FY26, compared with a much larger surplus of $1.7 billion in the corresponding period of the previous year. The deterioration primarily reflected a widening trade deficit as imports increased faster than exports. The goods trade deficit expanded to $27.9 billion from $22.7 billion a year earlier, driven by a 6.9% increase in imports amid stronger domestic demand and improving industrial activity. Economists note that rising imports are often a sign of economic recovery, particularly when manufacturers increase purchases of raw materials, machinery and intermediate goods. However, Pakistan’s history of recurring balance-of-payments crises means policymakers remain cautious about sustained import growth. The survey highlighted several positive developments that helped prevent the current account from slipping into deficit. Remittances increased by 8.2% to reach $30.3 billion during July-March FY26, providing a vital cushion against the expanding trade gap. The services account deficit narrowed to $2.1 billion from $2.3 billion, supported largely by strong growth in IT exports. Meanwhile, the primary income deficit declined by $364 million to $6.4 billion due to lower interest payments on external liabilities. Pakistan’s financial account also improved, recording a net inflow of $194 million compared with a net outflow of $1 billion during the previous year. The improvement was supported by higher official loan disbursements and multilateral financing. Foreign exchange reserves strengthened substantially, reaching $22.6 billion by mid-May 2026, including $17.1 billion held by the State Bank of Pakistan. The exchange rate remained broadly stable during the fiscal year, averaging Rs281.1 per dollar. Officials argue that stronger reserves and a stable currency have improved investor confidence and reduced external vulnerabilities. Analysts say the shrinking current account surplus reflects the next phase of Pakistan’s economic recovery, where stronger growth inevitably generates higher import demand. The key challenge will be ensuring export growth, remittances and foreign investment continue to expand sufficiently to finance those imports without creating renewed pressure on the balance of payments. For now, Pakistan has managed to preserve external stability, but the survey’s figures suggest that sustaining growth while maintaining a manageable external position will remain one of the government’s most important economic tests.

SBP Research Agenda 2026-2029: State Bank Unveils Bold Plan to Reshape Pakistan's Economic Future
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SBP Research Agenda 2026-2029: State Bank Unveils Bold Plan to Reshape Pakistan’s Economic Future

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The SBP Research Agenda 2026-2029 is far more than a routine policy document. It is a revealing blueprint that exposes the deep-rooted weaknesses of Pakistan’s economy and lays out how the country’s central bank intends to confront them. At a time when Pakistan continues to grapple with inflation shocks, recurring balance of payments crises, weak productivity, and a narrow financial base, the State Bank of Pakistan has acknowledged that traditional solutions are no longer enough. The newly released three-year roadmap seeks answers to some of the country’s most difficult economic questions while inviting academics, researchers, policymakers, and institutions to help shape future policy decisions. SBP Wants Answers to Why Monetary Policy Often Fails In the foreword to the document, SBP Governor Jameel Ahmad said the objective is to identify factors that weaken the effectiveness of regulations and policy tools so authorities can deliver more timely and informed responses. One of the most striking admissions in the agenda is that monetary policy transmission in Pakistan often works imperfectly. The central bank believes structural problems such as informality, limited financial access, institutional weaknesses, and fragmented markets dilute the impact of policy rate changes. The agenda seeks to understand why some interest rate decisions fail to influence spending, borrowing, and investment as intended. Can Inflation Ever Be Controlled Effectively? A major focus of the SBP Research Agenda 2026-2029 revolves around inflation. Researchers have been tasked with studying whether Pakistan should formally move toward flexible inflation targeting and, if so, how such a framework should be designed. Critical questions include: • What inflation target is realistic for Pakistan?• How wide should the tolerance band be?• How long should policymakers take to achieve targets?• How do supply shocks affect public confidence in the central bank? The document also acknowledges that climate change is emerging as a powerful driver of inflation volatility and can no longer be ignored in economic planning. Digital Currency and Virtual Assets Enter the Conversation In one of the agenda’s most forward-looking sections, SBP raises questions about technologies that until recently remained outside mainstream policy discussions. The central bank plans to examine whether a central bank digital currency could improve monetary policy transmission and what risks expanding digital financial services and virtual asset investments may pose to financial stability. The move suggests Pakistan’s financial authorities are preparing for a future increasingly shaped by technological disruption. Pakistan’s Financial Sector Under the Spotlight The second pillar of the SBP Research Agenda 2026-2029 focuses on financial sector deepening. Despite decades of banking growth, Pakistan continues to face low credit penetration and limited financial inclusion. Banks dominate the financial landscape while capital markets and non-bank institutions remain relatively weak. SBP wants researchers to determine whether these shortcomings stem from temporary economic conditions or deeper structural problems. The agenda seeks evidence on issues such as: • Whether banks are allocating enough credit to the private sector.• How funding structures influence lending decisions.• Whether liquidity management policies discourage deposit growth.• How minimum deposit rates affect economic stability.• How macroprudential tools should complement monetary policy. Islamic Versus Conventional Banks Another notable aspect of the roadmap is its call for a comparative analysis of Islamic and conventional banking models. Researchers will assess their efficiency, pricing mechanisms, credit allocation practices, operational costs, and resilience during financial shocks. The findings could shape future regulatory priorities within Pakistan’s dual banking system. Breaking Pakistan’s Boom and Bust Cycle Perhaps the most consequential section of the document addresses Pakistan’s chronic economic instability. The central bank openly recognizes that the country’s large undocumented economy undermines reliable data collection and weakens policy effectiveness. Research priorities include identifying ways to encourage formalization through: • Tax simplification.• Greater digitalization.• Easier regulatory procedures.• Reduced compliance burdens. The objective is clear. Pakistan cannot sustainably grow while significant portions of economic activity remain outside the formal system. The Big Questions About Remittances and Foreign Investment The SBP Research Agenda 2026-2029 also explores external vulnerabilities that repeatedly trigger economic crises. Researchers have been asked to examine how foreign direct investment, portfolio inflows, and external borrowing affect resilience. One particularly intriguing question stands out: Are workers’ remittances an economic blessing that supports stability, or do they create hidden vulnerabilities over time? The answer could influence future strategies for managing Pakistan’s external accounts. AI, Migration and Climate Transition Shape the Future The agenda extends beyond conventional economics. SBP wants deeper research into export diversification, global value chains, demographic shifts, migration patterns, technological transformation, and artificial intelligence adoption. It also prioritizes understanding the short- and medium-term economic consequences of Pakistan’s transition toward a low-carbon economy. These themes indicate that the central bank is increasingly looking beyond immediate crises and preparing for long-term structural change. A Research Agenda That Reflects Economic Reality The SBP Research Agenda 2026-2029 reveals an institution willing to confront uncomfortable truths about Pakistan’s economic system. By admitting the limitations of existing frameworks and inviting broad collaboration, the State Bank appears determined to replace assumptions with evidence. Whether this ambitious exercise translates into meaningful reforms remains to be seen. However, one message from the agenda is unmistakable: Pakistan’s economic challenges have evolved, and solving them will require fresh thinking, rigorous research, and policies grounded in reality rather than tradition.

NEC Approves Rs3.2t Development Budget as Provinces Agree to Provide Rs920b Grant
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NEC Approves Rs3.2t Development Budget as Provinces Agree to Provide Rs920b Grant

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The National Economic Council (NEC) on Wednesday approved a Rs3.2 trillion national development budget for the next fiscal year after three provinces agreed to freeze their development spending and provide Rs920 billion in grants to the federal government. The decision came amid mounting financial pressures and increased funding requirements for defense and water sector projects. Prime Minister Shehbaz Sharif chaired the NEC meeting, which also approved key macroeconomic targets for fiscal year 2026-27. Development Budget Reduced by 25% The approved development envelope of Rs3.2 trillion is around 25 percent lower than the Rs4.25 trillion initially proposed by the Annual Plan Coordination Committee (APCC) earlier this month. Planning Minister Ahsan Iqbal told reporters after the meeting that provincial governments had agreed to maintain their Annual Development Programmes (ADPs) at the actual spending levels of the current fiscal year. As a result, provincial development budgets have been reduced by Rs920 billion compared with the targets approved by the APCC. The NEC approved provincial development plans worth Rs2.218 trillion and a trimmed Public Sector Development Programme (PSDP) of Rs1 trillion. The revised PSDP is Rs126 billion lower than the amount initially approved. Provinces to Provide Rs920 Billion to Centre According to the new arrangement, provinces will provide a one-time grant of Rs920 billion to help the federal government meet urgent financing needs. The federal government had sought Rs1.2 trillion from the provinces to fund defense expenditures and strategic water projects. Ahsan Iqbal said the Finance Ministry was finalising the mechanism for transferring and accounting for the funds. Prime Minister Shehbaz Sharif thanked the provincial governments for their cooperation and consultations. He said the assistance reflected a collective effort to address national priorities. IMF Chief Briefed on New Fiscal Arrangement Prime Minister Shehbaz Sharif informed the NEC meeting that he had spoken with International Monetary Fund (IMF) Managing Director Kristalina Georgieva regarding the agreement between the Centre and provinces. According to the prime minister, Georgieva appreciated Pakistan’s efforts to create a coordinated fiscal framework. Under the arrangement, the federal government will retain most of the additional revenue generated through the National Finance Commission (NFC) award during the next fiscal year. The arrangement will temporarily reduce the effective share of provinces in the divisible pool, which currently stands at 57.5 percent. Officials said the agreement is contingent upon the Federal Board of Revenue (FBR) achieving its tax collection target. FBR Tax Target Set at Rs15.26 Trillion The FBR has been assigned a tax collection target of Rs15.264 trillion for fiscal year 2026-27. However, the tax authority has missed its targets by a combined Rs2.2 trillion over the last two fiscal years. Government officials said provincial contributions would be treated as grants and would not permanently alter the NFC formula. The provinces have deferred any long-term changes to revenue-sharing arrangements. Punjab Sees Biggest Reduction in Development Spending According to Ahsan Iqbal, Punjab’s development budget has been approved at Rs749 billion, which is Rs701 billion lower than the amount proposed by the APCC. Sindh’s development allocation stands at Rs706 billion, down by Rs110 billion. Khyber-Pakhtunkhwa’s development outlay has been fixed at Rs455 billion, reflecting a reduction of Rs109 billion. Balochistan’s development budget remains unchanged at Rs308 billion. Punjab Chief Minister Maryam Nawaz did not attend the meeting due to recovery from a recent medical procedure. Chief ministers from the remaining provinces participated in the session. Government Emphasises Defense and Counterterrorism Addressing the meeting, Prime Minister Shehbaz Sharif said strengthening national defense remained Pakistan’s top priority. He highlighted the sacrifices made by the armed forces, law enforcement agencies and the people of Khyber-Pakhtunkhwa and Balochistan in the fight against terrorism. The prime minister stressed that cooperation between the federation and provinces had played a key role in maintaining stability and would remain essential in the future. Focus Shifts From Stability to Growth Prime Minister Shehbaz said Pakistan must move beyond macroeconomic stability and focus on economic expansion. He called for policies aimed at increasing exports, boosting manufacturing and generating employment opportunities. Ahsan Iqbal said Pakistan could not continue relying on loans and support from friendly countries. He stressed that the national discourse should now focus on exports, productivity and sustainable economic growth. The planning minister also criticized the federal bureaucracy, describing it as one of the biggest obstacles to development. He said reforms were needed to modernize administrative structures that still operate with a colonial-era mindset. NEC Approves Key Economic Targets The NEC approved a 4 percent GDP growth target for fiscal year 2026-27. Inflation has been targeted at 8.2 percent. The agriculture sector is expected to grow by 3.8 percent, while large-scale manufacturing has been assigned a growth target of 4.5 percent. The industrial sector overall is projected to expand by 4 percent, supported by improvements in manufacturing, mining, construction and energy. Meanwhile, the services sector is expected to grow by 4.2 percent. The NEC approved a savings target equivalent to 14.3 percent of GDP and an investment target of 15 percent of GDP. Current Account Deficit Projected at $3.6 Billion The council approved a current account deficit target of $3.6 billion, or 0.7 percent of GDP, for the next fiscal year. Exports are projected to rise to $32.8 billion, while imports are expected to exceed $70 billion. As a result, the trade deficit is estimated at $37 billion. Remittances are expected to reach $42.3 billion, although officials acknowledged that uncertainties in the Middle East could affect inflows. Quarterly NEC Meetings Planned Ahsan Iqbal said the NEC had largely become a ceremonial body in recent years. He announced that quarterly meetings would now be held to monitor economic targets and development projects more effectively. The NEC also approved 11 reform initiatives aimed at addressing structural weaknesses, increasing exports, improving productivity and strengthening agriculture and human capital development.

Pakistan Fiscal Deficit Falls to 0.7 Percent as Austerity and Revenue Surge Reshape Economy
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Pakistan Fiscal Deficit Falls to 0.7 Percent as Austerity and Revenue Surge Reshape Economy

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Pakistan fiscal deficit has witnessed a dramatic collapse, offering one of the strongest signs yet that the country’s painful economic reforms may finally be paying off. According to the Economic Survey of Pakistan 2025-26, the overall fiscal deficit narrowed sharply to just 0.7 percent of GDP during July 2025 to March 2026. During the same period a year earlier, the deficit stood at 2.6 percent of GDP. For a country long trapped in a cycle of debt accumulation, IMF negotiations, and budgetary crises, this turnaround represents a significant shift in Pakistan’s economic story. The improvement was driven by stronger revenue collection, aggressive austerity measures, lower interest payments, and tighter fiscal discipline at both federal and provincial levels. Pakistan Fiscal Deficit Improvement Signals a Major Shift The latest figures reveal that Pakistan generated a primary surplus of Rs4.09 trillion, equivalent to 3.2 percent of GDP. This exceeded the Rs3.47 trillion primary surplus recorded during the same period of FY2024-25. A primary surplus means the government earned enough revenue to cover all expenditures except debt servicing obligations. Economists often view this indicator as a critical measure of fiscal health. The achievement becomes even more remarkable considering Pakistan’s long-standing reputation for weak tax collection and persistent fiscal slippages. Revenue Boom Changed the Fiscal Equation The government’s success was underpinned by stronger revenue generation. Pakistan’s consolidated revenues climbed to Rs14.79 trillion during the first nine months of FY2025-26, representing a growth of 10.7 percent compared with the previous year. Tax revenues rose by 11.3 percent to Rs10.17 trillion, while non-tax revenues increased by 9.5 percent to Rs4.63 trillion. Federal Board of Revenue collections maintained double-digit growth and crossed the Rs10 trillion mark during the July-April period. However, despite the improvement, the FBR still fell Rs684.4 billion short of the ambitious targets agreed under IMF-supported fiscal reforms. Austerity Measures Delivered Breathing Space The biggest relief came from falling debt servicing costs. Total interest payments dropped by 23.2 percent to Rs4.95 trillion, compared with Rs6.44 trillion during the same period last year. The reduction reflected lower domestic interest rates and improved debt management practices. The federal government also imposed strict spending controls that included: • A ban on the purchase of luxury and non-essential government vehicles.• A freeze on creating new public sector positions.• The abolition of vacant government posts that remained unfilled for more than three years.• Restrictions on publicly funded foreign visits and overseas medical treatments. These decisions helped reduce consolidated expenditures by 4.2 percent despite continued inflationary pressures. Pakistan’s Tax System Undergoes a Structural Transformation Beyond short-term gains, Pakistan’s tax structure is beginning to evolve. Historically, the country relied heavily on indirect taxation, which disproportionately affected ordinary consumers. Now, direct taxes account for 49.3 percent of total FBR revenues, up significantly from 36.5 percent in FY2021. At the same time, indirect taxes declined to 50.7 percent of collections. The provinces also introduced synchronized Agriculture Income Tax legislation, bringing agricultural earnings closer to taxation standards applied to corporations and salaried individuals. This reform has long been considered politically difficult but economically necessary. Provinces Quietly Became Fiscal Heroes One of the less discussed aspects of Pakistan’s fiscal turnaround is the role played by provincial governments. Combined provincial surpluses surged from Rs518.2 billion in FY2024 to Rs921.5 billion in FY2025. Punjab generated the largest surplus at Rs348.5 billion. Sindh more than doubled its reserves to Rs283 billion. Khyber Pakhtunkhwa raised its surplus to Rs176.2 billion. Balochistan maintained stable fiscal discipline with a surplus of Rs113.8 billion. These surpluses strengthened the national balance sheet and supported federal consolidation efforts. Development Spending Was Not Sacrificed Critics often argue that austerity comes at the expense of growth. However, Pakistan attempted to avoid that trap. Development expenditures and net lending expanded by 18.7 percent to Rs1.83 trillion during July-March FY2025-26. Under the Public Sector Development Programme, more than 98 percent of allocations were directed toward completing ongoing projects rather than launching politically motivated initiatives. Infrastructure projects received the largest share of funding, followed by investments in health, education, Special Areas, and the merged districts of Khyber Pakhtunkhwa. Can Pakistan Sustain This Fiscal Discipline? The Pakistan fiscal deficit story is impressive, but the celebration may be premature. The Economic Survey warns that rising geopolitical tensions in the Middle East pose serious threats to these gains. Any sharp increase in oil prices, disruptions to global supply chains, or renewed inflationary pressures could rapidly reverse recent progress. Higher energy costs could force the government back into expensive subsidies, widen debt obligations, and place renewed stress on public finances. Pakistan has demonstrated that fiscal discipline is possible. The real challenge now is sustaining it in an increasingly uncertain global environment. The next few months will determine whether this historic turnaround marks the beginning of lasting economic stability or merely a temporary reprieve in Pakistan’s long struggle against fiscal vulnerability.

The Boardroom PK delivers trusted business news, analysis, and insights from Pakistan and beyond, keeping readers informed, inspired, and ahead in the evolving world of business and leadership.

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