Planning minister sees economic recovery amid Middle East conflict risks

ISLAMABAD, (APP - UrduPoint / Pakistan Point News - 13th May, 2026) Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal on Wednesday said Pakistan’s economy showed signs of recovery during FY2025-26, citing lower inflation, industrial growth, rising remittances and improved development spending.

Briefing the media on the Monthly Development Update for May 2026, he highlighted that during the first eight months of FY 2025–26, Pakistan’s economy witnessed encouraging indicators including lower inflation, recovery in Large Scale Manufacturing, stability in the exchange rate, record performance of the stock market, improved PSDP utilization, and rising remittances.

He, however, cautioned that the ongoing conflict in the middle East poses a significant external risk to the economy through rising global oil prices, higher import costs, inflationary pressures, and external sector vulnerability. Referring to IMF projections, he noted that global growth is expected to slow to 3.1 percent in 2026 (from 3.3 percent pre-conflict), while global inflation is projected to rise to 4.4 percent (from 3.8 percent).

Ahsan Iqbal stated that average CPI inflation during July–February FY 2025–26 stood at 5.5 percent compared to 5.7 percent last year; however, year-on-year inflation showed an upward trend, increasing from 7.3 percent in March 2026 to 10.9 percent in April 2026.

He added that in response, the government has strengthened price monitoring through weekly meetings of the National Price Monitoring Committee, and coordinated efforts of federal and provincial governments have helped bring essential commodity prices closer to pre-conflict levels.

The Minister said that Large Scale Manufacturing registered a broad-based recovery of 6.5 percent during July–March FY 2025–26, marking a strong turnaround after two years.

He attributed this improvement to key policy measures including the Prime Minister’s export enhancement package, increased private sector credit, improved PSDP utilization, and ease of doing business reforms aligned with URAAN Pakistan objectives.

He further noted that 15 out of 22 sectors recorded positive growth, including automobiles, electrical equipment, tobacco, food, non-metallic mineral products, beverages, and wearing apparel.

He added that fiscal performance remained strong, with FBR revenues reaching Rs10.3 trillion during July–April FY 2025–26, showing a 10.

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3 percent increase compared to last year, supported by improved enforcement and economic recovery.

Remittances also remained robust, increasing by 8.5 percent to $33.9 billion, reflecting the confidence of overseas Pakistanis in economic stability.

He, however, cautioned that the Middle East conflict poses downside risks to future remittance inflows, while the government is taking proactive measures to protect the interests of the Pakistani workforce abroad.

On the external sector, the Minister stated that during July–March FY 2025–26, exports of goods and services stood at $30.6 billion, while imports increased to $56.3 billion. He highlighted that services exports grew strongly by 17 percent to $7.3 billion, outpacing a 10.1 percent increase in imports. Despite external pressures, the current account remained in surplus for three consecutive months, supported by strong remittances and rising IT exports.

He further informed that PSDP utilization during July–April FY 2025–26 reached 56.1 percent (Rs. 469.8 billion), compared to 40.9 percent last year, reflecting increased development activity.

He said the CDWP considered 41 agenda items, approving 23 projects, one policy paper, and four concept clearances, while referring three items to ECNEC and deferring ten for further review. These approved projects are expected to generate around 3,197 direct and 7,956 indirect jobs.

The Minister also highlighted savings of Rs. 12 billion achieved through cost rationalization in development projects, reflecting improved efficiency and prudent planning.

In April 2026, 19 projects were monitored and three evaluated to ensure effective implementation. He further noted that a high-level roundtable on water security held on 28 April 2026 underscored water scarcity as a critical national issue requiring coordinated national action under frameworks such as URAAN Pakistan.

Concluding his remarks, Ahsan Iqbal said that Pakistan’s economic growth for FY 2025–26 is estimated at 3.7 percent, with agriculture growing at 2.89 percent, industry at 3.51 percent, services at 4.09 percent, and construction at 5.73 percent.

Wheat production increased from 28.3 to 29.6 million tons, rice production rose by 2.8 percent, and sugarcane production increased by 6.2 percent. He added that the size of the economy has reached $452.1 billion, while per capita income stood at $1,901.