Pakistan’s economic survey showed on Thursday that the government missed three major macroeconomic targets, but it maintained external sector stability and a broad-based recovery in the current fiscal year despite the negative effects of the war in the Middle East. According to the Pakistan Economic Survey 2025-26, the government failed to meet the targets of economic growth of 4.2% and the investment-GDP ratio and savings-GDP ratio also fell short of the set targets. These indicators are considered to be the basis for sustainable higher economic growth without digging into the debt trap. The Federal Board of Revenue’s tax target is also being missed by a wide margin of over Rs1 trillion. But the government was on track to meet the primary budget surplus target – a key to the continuation of the International Monetary Fund’s programme, and the inflation target can also be met despite supply shocks. The two deficits – budget and current account – have been real problems for Pakistan for a long time and these have been brought under control, Finance Minister Muhammad Aurangzeb said while sharing the key findings of the survey. The fiscal deficit stood at 0.7% of GDP in the first nine months of this fiscal year, while the primary balance remained in surplus. The current account had a surplus of $72 million. The Minister of Finance maintained that remittances will continue to be a very important component in the stability of the external sector. Aurangzeb recounted the difficult journey of the fiscal year 2025-26, which began under the clouds of tariff uncertainty and the impact of floods in three rivers affecting crops in Punjab province.
"When we entered this financial year in July, the first thing we faced was trade uncertainty, which was due to customs discussions about how to deal with customs around the world, and reached a point at the end of July where we could get into a competitive position in terms of our exports, especially to the United States," Aurangzeb added. Right after that, he mentioned, Pakistan faced floods which prompted rescue and relief efforts to rehabilitate people and rebuild infrastructure. The story did not end here, as in March; a regional conflict broke out, said Aurangzeb. Aurangzeb pointed out that out of these three exogenous factors, only tariff uncertainty prevailed at the time of presentation of the earlier economic survey. "The other factors were not in the picture."
The minister said the government still achieved economic growth of 3.7%, indicating a broad-based recovery. The government hoped to achieve a growth rate of over 4%, but the war broke out and missed the annual target. It also missed the investment and savings targets, which remain low and need to be significantly higher to ensure higher growth rate. To a question, the finance minister said that the investment and tax-to-GDP ratios were hovering around the same levels and these need to move up. The government is also going to miss its export targets for this financial year as exports remained negative by nearly 6%. Nine million Pakistanis send $40 billion in remittances, but 250 million people earn barely $40 billion from exports (of goods and services), Ahsan Iqbal said while speaking on the occasion.
"Falling exports are our biggest failure which forces the government to take loans as a stop gap scheme"said the planning minister. We have to think how Vietnam with a population of 100 million got $38 billion foreign direct investment and Pakistan could hardly get $1.5 billion, Iqbal said. To a question, the finance minister said that reforms have been introduced in FBR but it will take at least one to two years to change the culture. The Finance Minister said that the culture of nepotism was being ended in the FBR, but there were still problems related to theft and collusion. The finance minister further said that the local investment must lead the foreign investments and political continuity was very important for the investment. Assuring that the government would implement the national customs policy without any changes in it, he said that exports cannot grow this year and will take time. Unemployment According to the Economic Survey, the unemployed rose from 4.5 million to 5.9 million, with the unemployment rate rising from 6.3% to 7.1%, underscoring the need to further accelerate job creation in line with labor force growth. The unemployment rate of 7.1% was the highest in the past 21 years. The survey found that poverty in Pakistan rose to an 11-year high of 29%, while income inequality has reached its highest level in 27 years as people’s real incomes and consumption fell sharply over the past seven years. Poverty rose sharply from 21.9% recorded in 2018-19, while income inequality also widened, raising concerns about the inclusiveness of the country’s economic recovery. The study found that the national Gini coefficient, a key measure of income inequality, rose from 28.4 to 32.7 over the same period. But the finance minister said the government has ensured a broad-based economic recovery.
"We have achieved a broad-based recovery despite the conflict that has harmed the region as well as the world," he elaborated. FBR Results To a question about provincial subsidy to meet the federal expenditure, the finance minister said that the arrangement with the provinces would be for a certain period and it will be more than for a year. The three provinces, except Balochistan, agreed to freeze their development spending to provide at least Rs 900 billion. to the center for expenditure on defense and water sector projects. But the arrangement is conditional on FBR’s performance. The minister said the meeting with Chief Minister Khyber Pakhtunkhwa on provincial grants was also productive and all the four chief ministers have assured to expand cooperation. However, Finance Advisor KP Muzzammil Aslam said KP’s contribution was conditional on arranging a meeting with party leader Imran Khan. Economic growth The Minister of Finance said that there was growth in all three sectors. "The livestock sector continues to grow from strength to strength. Although we mainly focus on crops, the livestock sector is very important as dairy and livestock make up 60% of agricultural GDP"he added. As part of industry and manufacturing, large scale manufacturing (LSM) grew 6.1% in FY26 – the highest in the last four years. The manufacturing sector saw broad growth, as 16 out of 22 sectors showed a positive development, he added. On the external side, he said the structural deficit had been the real problem for Pakistan for the longest time. "On the fiscal side, we have shown a surplus and reduced the deficit."
"Remittances are and will remain a very important component of our external balance sheet as we move forward"said Aurangzeb. Aurangzeb said exports were declining due to two major factors, one sector leading the decline was food, with rice exports down by $1.1 billion and sugar exports down by $400 million. Overall, there was a $1.5 billion reduction in food sector exports. In terms of export growth in July-May FY26, the textile sector took the lead, with woven garments up 5%, home textiles up 3% and knitwear up 3%.
