Pakistan’s macroeconomic stability strengthens with 3.8% real GDP growth in H1-FY26: SBP

The State Bank of Pakistan (SBP), releasing its State of Pakistan’s Economy, Half Year Report FY26 on Tuesday, stated that Pakistan’s macroeconomic stability strengthened further in the first half of fiscal year 2025-26 with 3.8% real GDP growth, despite global trade-related uncertainty and domestic floods

KARACHI, (APP - UrduPoint / Pakistan Point News - 12th May, 2026) The State Bank of Pakistan (SBP), releasing its State of Pakistan’s Economy, Half Year Report FY26 on Tuesday, stated that Pakistan’s macroeconomic stability strengthened further in the first half of fiscal year 2025-26 with 3.8% real GDP growth, despite global trade-related uncertainty and domestic floods.

The central bank, in a statement issued here, highlighted significant improvements in economic indicators during July-December FY26 and informed that average National CPI inflation eased, fiscal balance posted a surplus and SBP’s foreign exchange purchases and net financial inflows shored up external buffers while prudent monetary and fiscal policies, ongoing structural reforms, favorable commodity prices and IMF program further supported the economic momentum.

The Report also flagged the risks the Middle East War posed to macroeconomic outlook as supply chain disruptions were likely to impact inflation trajectory, external trade and remittance flows, and the economic activity in Pakistan.

According to the Report, the macroeconomic stability facilitated growth momentum in H1-FY26 and the real GDP, mainly driven by pickup in industrial activity, followed by services and agriculture sectors, grew at twice the pace of the same period last year- recording 3.8% growth as compared to 1.9% real GDP growth of H1-FY25.

The Report noted that the momentum in economic activity translated into a volume-driven increase in imports during the period under review while a significant drop in rice exports led to a decline in export earnings. However, steadily rising workers’ remittances continued to finance a major part of the deficits in trade, services, and primary income balance, helping to keep the current account deficit at moderate levels, it added.

The Report reviewed the continuous cautious monetary policy stance of SBP that maintained an adequately positive real interest rate on a forward-looking basis. “Continued prudent policy mix, an improved external account position and stability in exchange rate, softened international commodity prices along with downward adjustments in administered electricity tariffs led to a moderation in inflation during H1-FY26,” it noted.

The NCPI inflation averaged 5.

<?php /*?> <?php */?>

2% in H1-FY26, about 2 percentage points lower compared to the same period last year. The report also highlighted that the substantial reduction in interest payments and fiscal consolidation measures turned the fiscal balance into a surplus in H1-FY26, for the first time since FY02, while the primary surplus remained at last year’s level.

Underscoring the need for deep-rooted economic reforms for the country's transition to a sustainable high-growth path with sustained macroeconomic stability, the Report stressed on addressing “the long-standing issues, including low savings and investment, weak competitiveness, falling exports, subdued foreign direct investment, and the persistently low tax to GDP ratio.”

The Report, in a special chapter on Climate Change and its impact on Pakistan’s Economy, highlighted that Pakistan is the 15th most affected country by climatic events and facing high levels of vulnerability to climate change and low levels of preparedness to deal with the ensuing challenges.

The Report also pinpointed the country's high emissions intensity of GDP that reflects structural inefficiencies and a carbon-intensive growth trajectory and requires substantial investments in climate mitigation and adaptation.

Discussing the outlook for FY26, the report noted that the latest data on high-frequency indicators, including Purchasing Managers’ Index (PMI), LSM and construction, depicting that economic activity maintained the momentum through February 2026, before the war began to affect the output in the remaining month of FY26.

SBP projected that the real GDP growth for FY26 to remain close to the lower bound of the earlier projected range of 3.75 to 4.75% while the current account deficit is expected to be close to the lower bound of the earlier projected range of 0 to 1 percent of GDP despite momentum in economic activity and higher commodity prices.

Discussing the multifaceted macroeconomic risks to medium-term outlook in case of an extended war in the Middle East, the Report further indicated that a surge in international oil prices and its impact on other commodity prices may keep the NCPI inflation above the upper bound of the medium-term target range of 5 to 7% for most of FY27.