September inflation is projected at between 9.9% and 10.5% year-on-year, according to estimates from Topline Securities, Ismail Iqbal Securities, Abbasi and Company and Growth Securities, compared with 11.15% in August and 5.61% in September last year.

The country’s headline inflation clocked in at 11.1% on a year-on-year (YoY) basis in August 2026, up from 9.2% recorded in July, as shown by Pakistan Bureau of Statistics (PBS) data on Tuesday.

Topline Securities expects inflation at 10.25-10.3% year-on-year and 1.3% month-on-month, with fuel prices estimated to have risen 6.5% during the month.

“Electricity prices on a MoM basis have increased by 9.58% while Liquefied Petroleum Gas (LPG) price registered an increase of 2.61%.

“The increase in electricity charges in Sep 2026 is mainly attributable to the higher Charges Adjustment (FCA) of Rs2.0581/kWh vs. Rs0.7503/kWh in Aug 2026, along with positive Quarterly Tariff Adjustment (QTA) of Rs0.5194/kWh,” said Topline.

Ismail Iqbal Securities expects September inflation at 10.5% year-on-year and 1.4% month-on-month, saying energy accounted for a larger share of the increase while food pressures eased.

“Housing contributes around 55bps. Almost all of it comes from a 12.6% rise in electricity charges, as the negative quarterly adjustment drops out and a larger monthly fuel charges adjustment feeds through, with LPG adding a little more. Transport adds a further 35bps on a 7.3% rise in motor fuel, after daily price revisions pushed petrol and diesel sharply higher through the first half of the month,” said Ismail Iqbal Securities.

Food is expected to contribute about 25 basis points, with onion prices rising 32% during the month and fresh vegetables remaining firm.

“The month’s mix is more important than the headline number,” Ismail Iqbal Securities said, noting that food accounted for almost half of August’s inflation, while the contribution from energy is now expected to rise to more than a quarter from about a sixth.

“The difference matters. Food spikes like this usually reverse once supplies return to normal, but higher fuel and power prices tend to stay, and over time they push up transport fares, freight costs and core inflation,” said the brokerage house.

Meanwhile, Abbasi and Company expects September national CPI inflation at 10.2% year-on-year and 1.1% month-on-month. It said food inflation could remain elevated, with higher prices of wheat flour, meat, rice, fresh milk, cooking oil and vegetable ghee contributing to the increase in the food index.

The brokerage also cited higher motor fuel, transport and housing costs as factors pushing inflation upwards.

“Inflation is expected to remain elevated, primarily due to supply disruptions caused by the closure of the Strait of Hormuz and Bab-el-Mandeb amid renewed geopolitical tensions. Higher fuel prices are likely to exert significant upward pressure on transportation costs, while increased electricity and LPG charges are expected to drive further gains in the housing index,” it warned.

Growth Securities has the lowest forecast among the four brokerages, projecting September inflation at 9.9% year-on-year and 0.8% month-on-month.

“The impact of higher fuel prices is expected to be slightly mitigated by lower food prices,” it said.

It expects the transport index to rise 0.7-0.75% month-on-month after average petrol prices increased 16.9% to Rs393.41 a litre and high-speed diesel prices rose 12.3% to Rs423.47.

“We expect CPI to remain in the 9-10% range till March 2027 if average fuel prices remain in Rs390-400/liter levels and FY27 average to be 9-9.5%,” said the brokerage house.

The inflation outlook is also putting the State Bank of Pakistan’s monetary policy stance under scrutiny.

The central bank kept its policy rate unchanged at 11.5% this month.

Ismail Iqbal Securities expects another hold at the upcoming meeting in October and “sees no change before the end of CY26”.

On the other hand, Growth Securities “expects the Monetary Policy Committee of SBP to increase policy rate by 50-100 bps in the upcoming Oct 26, 2026 meeting if fuel prices remain elevated”.

Inflation is projected at between 10.75%-11.3% year-on-year in August, up from 9.21% in July, according to estimates from Ismail Iqbal Securities, Topline Securities and JS Global. The readings would mark a sharp increase from the 3% recorded a year earlier, reflecting both higher prices and an unfavourable base effect.

Pakistan’s headline inflation clocked in at 9.2% on a year-on-year (YoY) basis in July 2026, according to Pakistan Bureau of Statistics (PBS) data.

On a monthly basis, Ismail Iqbal Securities estimates a 1.2% month-on-month rise, while Topline projects 1.06% in August.

“Food inflation is expected to increase by 1.82% MoM, primarily driven by higher prices of onions (+48%), eggs (+10%), pulse gram ( +7%) and wheat (+6%),” said Topline Securities.

Similarly, Ismail Iqbal Securities expects the food component to account for about 70 basis points of the monthly CPI increase, citing onions, chicken, eggs, potatoes, pulses and fresh vegetables. “Most of this should reverse as supply normalises,” said the brokerage house.

Transport costs are also expected to provide another significant push to inflation.

“Transport adds a further 20bps on a close to 7% rise in motor fuel, the reversal we flagged last month when the late July revision in ex-depot prices came too late to land in the July index,” said Ismail Iqbal.

Similarly, Topline estimates transport to witness a rise in prices amid higher international oil prices and increased dealer margins.

“As fuel prices are now calculated on a weighted- average basis through the last day of the month, we assume motor fuel prices to contribute ~5% to the increase in the transport index,” said the brokerage house.

Meanwhile, JS Global, which expects CPI to clock in at 10.9% in August, noted that renewed geopolitical flare-ups and disruptions to critical energy trade routes elevated global uncertainty, resulting in a cautious stance by the SBP.

“With external risks outweighing the case for further easing, MPC kept the policy rate unchanged at 11.50% in the last meeting.

“To assess downside risks to our baseline inflation outlook for FY27, we present an alternative scenario assuming prolonged geopolitical tensions in the Middle East. Under this scenario, higher imported energy costs could temporarily lift Pakistan’s inflation trajectory to 9%, before stabilising at ~8%,” said the brokerage house.

IT exports stood at $354 million in July 2025.

The increase represents a rise of $63 million, underscoring the growing contribution of the IT and digital services sector to Pakistan’s external account.

On a full-year basis, exports of telecommunications, computer and information services increased to $4.6 billion during FY2025-26, compared with $3.814 billion in FY2024-25, showing growth of around 21%.

Also read: Pakistan’s IT exports surpass $4bn for first time

The data shows that the sector remained the largest contributor to Pakistan’s services exports during FY2025-26. Total services exports reached $10.02 billion during the year, compared with $8.45 billion in FY2024-25.

The figures suggest that technology and digital services continue to outperform several traditional services categories and are emerging as a key source of foreign exchange for the country.

Within services exports, transport services stood at $916 million, travel at $1.116 billion and other business services at $2.155 billion during FY2025-26.

The government has been seeking to accelerate IT and digital exports by expanding broadband connectivity, promoting freelancing and software services, and facilitating technology companies and exporters.

The strong July performance provides an encouraging start to FY2026-27, with technology-related services maintaining their upward trajectory despite broader external-sector pressures.

Pakistan’s overall services exports rose to $927 million in July 2026 from $728 million in July 2025, an increase of around 27%.

Dr Noman Said, CEO of SI Global Solutions, said growth in the IT sector was expected to accelerate in the coming years due to consistent government policies aimed at facilitating IT exporters and increasing foreign exchange earnings.

He said stakeholders in the IT sector should formulate an aggressive export strategy to achieve the $10 billion target set under the government’s Uraan programme by FY2028-29, describing the target as ambitious but achievable.

“All stakeholders need to work extensively to strengthen the country’s IT sector and identify and address its weaknesses at the local level,” he said. “Capacity building of human capital is the need of the hour to create a strong foundation for the industry, while consistently exploring new clients and expanding existing markets.”

Pakistani IT companies have continued to explore new markets by participating in major international technology trade fairs. With government support, IT exporters have also participated in trade shows and exhibitions in Europe and the United States.

Saad Shah, CEO of Hexalyze, said IT exporters should shift their focus towards high-value projects in international markets, particularly in areas such as cybersecurity, machine learning, AI-driven automation and enterprise solutions.

He said Pakistani IT companies and freelancers were still engaged in low-value, traditional assignments, while securing major projects through collaboration with local and international companies could significantly enhance their capabilities and generate higher export earnings.

Ibrahim Amin, Chairman of the Pakistan Freelancers Association (PAFLA), said the number of freelancers and digital workers in Pakistan was increasing as awareness of new global work trends continued to grow.

He noted that Pakistani freelancers were contributing valuable foreign exchange to the country and should be recognised at the national level to encourage students and aspiring freelancers to pursue freelancing as a viable career.

Amin demanded that the government establish a fund and a tax incentive programme to encourage freelancers to begin their entrepreneurship journey and set up a small-sized company to generate jobs in the country.

It is pertinent to mention that the government has extended the 0.25% tax rate for registered IT companies and freelancers to support the growth of the IT sector.

The deficit, which stood at 7.9% of GDP in FY22, has declined for three consecutive years, while the government recorded a primary surplus, before interest payments, of 2.9% of GDP in FY26, Schehzad said in a post on X on Thursday.

He described the outcome as the strongest fiscal performance in 22 years.

“Pakistan has closed FY2025-26 with a historic strengthening of its public finances — marking a decisive shift from recurring fiscal stress toward discipline, stability and sustainable growth,” said the adviser.

According to the figures cited by Schehzad, Pakistan’s primary surplus rose from 0.9% of GDP in FY24 to 2.4% in FY25 and 2.9% in FY26, “the highest since FY21”.

“In just three years, the fiscal deficit has improved by 5.2 percentage points of GDP, while the primary balance has swung by 3.9 percentage points— from a 1.0% deficit to a record 2.9% surplus,” said Schehzad.

The government’s overall fiscal deficit was Rs3.31 trillion in FY26, while the primary surplus amounted to Rs3.63 trillion, Schehzad said. Meanwhile, revenues reached Rs19.8 trillion, including Rs14.2 trillion in tax receipts.

Interest payments, meanwhile, fell to about Rs6.95 trillion in FY26 from Rs8.9 trillion a year earlier, according to the statement.

Private sector credit reaches Rs11.38trn in FY26

“This is not simply deficit reduction. It reflects a fundamental strengthening of Pakistan’s fiscal position — driven by stronger revenues, expenditure discipline and sustained reforms,” said Schehzad.

Schehzad said debt growth had slowed to a 20-year low and that the government’s debt-to-GDP ratio had declined to about 68%, alongside a reduction in debt-servicing costs.

“This means lower financing pressure, improving debt sustainability and greater fiscal space for development.”

The fiscal consolidation has also coincided with an improvement in Pakistan’s external position, including rebuilding foreign-exchange reserves and stronger external accounts. S&P Global Ratings upgraded Pakistan’s sovereign credit rating to B from B- in July, “specifically recognising faster fiscal consolidation, stronger revenue mobilisation, rebuilding reserves and declining government debt-to-GDP”, Schehzad said.

“Together, these improvements provide a stronger foundation for investment, development and sustainable, inclusive growth,” he maintained.

The deficit had stood at $3.15 billion in July 2025, the Pakistan Bureau of Statistics (PBS) reported.

“Data suggests the underlying import appetite has not genuinely cooled,” Ismail Iqbal Securities’ Head of Research Saad Hanif said in a commentary. “The reopening of the economy also kept imports elevated.”

Import payments rose 18% to $6.89 billion in July compared to $5.84 billion in the same month of the last year, PBS data showed.

Hanif said import payments had remained higher mainly due to a rise in energy prices in the wake of Middle Eastern geopolitical crisis.

“The prices of petroleum oil products and RLNG surged in the range of 40-50% in the month of July 2026 compared to the same month of the last year.”

Pakistan remains a net energy importer. Historically, the share of energy in total imports remains in the range of 20-25% of total import bill.

“Besides, import of cars and machinery for industries and agriculture sectors also kept imports on higher side,” Hanif said.

The exports surged 9.54% to $2.94 billion in July 2026 compared to $2.68 billion in July 2025, according to the PBS.

Hanif said the export earnings had increased apparently due to revival in food exports – primarily rice exports in July.

“Textiles remain major export of the country, having 55-60% share in total export earnings.”

Textile exports have remained stable in the previous fiscal year ended June 30, 2026. The publication of detailed import and export numbers later this month will reveal what items contributed towards increasing export earnings in July 2026, according to Hanif.

Trade deficit narrows 15% MoM

The trade deficit narrowed over 15% in July 2026 compared to $4.66 billion in June 2026 in the wake of strong revival in export earnings by a staggering 31% increase month-on-month (MoM), according to the PBS and the Ministry of Finance.

The export earnings increased to $2.94 billion in July 2026 compared to $2.24 billion in the prior month of June 2026, according to the PBS.

“Exports surged 31% MoM in July – one of the strongest monthly increases in recent years,” the Ministry of Finance said.

The import payments remained stable at $6.89 billion in July 2026, ticking down 0.17% compared to June 2026.

“Exports growth is encouraging early sign of FY27 Budget’s focus on exports, competitiveness, lower cost of doing business and private sector-led growth,” the Ministry of Finance commented.

“The July data points to strengthening external sector momentum and provides an encouraging start to FY27, reinforcing Pakistan’s transition towards a more competitive, export-led and sustainable growth model.”

“The YoY surge was primarily driven by lower fuel prices, improved farm economics, stronger agricultural activity, and a gradual recovery in economic and auto sector demand,” the brokerage said.

Excluding furnace oil (FO), oil marketing companies’ (OMCs) sales climbed 18.5% YoY, marking the strongest July performance since July 2021.

High-speed diesel (HSD) volumes increased 19% YoY to 0.62 million tons, while motor spirit (MS), commonly known as petrol, rose 23% YoY to 0.73 million tons.

Meanwhile, FO sales surged 406% YoY to 0.08 million tons, which AHL attributed “primarily to higher furnace oil consumption for power generation”.

On a month-on-month (MoM) basis, total petroleum sales increased 20%, “supported by lower domestic petroleum prices following the decline in global oil prices amid easing geopolitical tensions”.

MS sales rose 12% MoM, while HSD volumes climbed 25%. FO sales also increased 89% over the previous month, “which we attribute to higher seasonal demand for power generation during the summer months,” said AHL.

Among oil marketing companies, Pakistan State Oil (PSO) outperformed the sector, with total sales rising 38% YoY to 702,000 tons, led by a 44.1% increase in MS sales and a 40.3% rise in HSD offtake.

AHL said PSO captured market share from Gas & Oil Pakistan (GO), whose MS market share fell to 5%, the lowest since June 2024, while its HSD market share declined to 7%, the lowest since May 2024.

Separately, AHL estimated the government collected around Rs134 billion in Petroleum Development Levy (PDL) during July, keeping collections broadly on track to achieve the FY27 target of Rs1.68 trillion, which is 11.9% higher than the revised FY26 target.

Pakistan’s headline inflation clocked in at 9.2% on a year-on-year (YoY) basis in July 2026, as shown by Pakistan Bureau of Statistics (PBS) data on Monday.

The consumer price index (CPI) was recorded at 11.1% in June. The CPI stood at 4.1% in July 2025.

On a month-on-month basis, it increased by 1.2% in July 2026 as compared to a decrease of 0.3% in the previous month and an increase of 2.9% in July 2025.

Urban CPI inflation increased by 8.7% on a year-on-year basis in July 2026 as compared to an increase of 11.2% in the previous month and an increase of 4.4% in July 2025.

On a month-on-month basis, it increased by 1.2% in July 2026 as compared to a decrease of 0.5% in the previous month and an increase of 3.4% in July 2025.

Rural CPI inflation increased by 9.9% on a year-on-year basis in July 2026 as compared to an increase of 10.9% in the previous month and an increase of 3.5% observed in July 2025.

On a month-on-month basis, it increased by 1.2% in July 2026 as compared with no change in the previous month and an increase of 2.2% in July 2025.

Government expectations

In its latest monthly outlook, the Finance Division has sounded the alarm over persistent inflation by projecting CPI at 9-10% in July 2026 amid rising global oil prices, as Pakistan’s economy faced a 33.9% plunge in foreign direct investment, declining from $2.48 billion in 2024-25 to $1.64 billion in the last fiscal year.

Days ago, the State Bank of Pakistan (SBP) Monetary Policy Committee (MPC), in its first meeting in the fiscal year 2026-27, decided to keep the policy rate unchanged at 11.5%.

In a press briefing, the SBP Governor Jameel Ahmad expected CPI inflation to decline in July.

“We expect the CPI to clock in at the upper band of our target range of 5-7% by the end of this fiscal year,” said Ahmad.

Analysts expectations

Earlier, analysts expected Pakistan’s headline inflation to return to single digits in July, but noted that the slowdown was largely due to favourable base effects while underlying price pressures remain.

Ismail Iqbal Securities expected headline inflation at 9.3% YoY, saying the return to single digits is “largely base-driven rather than a genuine easing in momentum.”

Separately, JS Global expected headline CPI at 9.1% YoY in July.

Despite record workers’ remittances, Pakistan’s external account was pushed into negative due to high imports, while exports remained largely stagnant during the outgoing fiscal year.

Earlier, SBP Governor Jameel Ahmad projected the current account would remain balanced or in surplus for the second consecutive fiscal year, i.e. FY26, paving the way for an increase in economic activities and growth in the ongoing fiscal year.

“I am quite confident that June numbers will also be good. So, overall, we are expecting the current account balanced or slightly in surplus for FY26,” the central bank chief said while speaking at the Pakistan Banking Summit 2026.

The deterioration in the C/A was largely driven by a widening trade gap.

During FY26, Pakistan’s exports of goods and services clocked in at $40.88 billion, compared with $40.79 billion in FY25, reflecting a rise of just 0.2%.

Meanwhile, imports of goods and services climbed to $76.39 billion during the fiscal year from $70.43 billion a year earlier, an increase of nearly 8.5%.

Workers’ remittances reached a record $41.59 billion in FY26, up 8.6% from $38.3 billion received in the previous fiscal year, providing crucial support to the country’s external position despite a wider trade gap.

“The main reason behind the current account deficit is the widening trade deficit, which was the highest since FY22,” Sana Tawfik, Head of Research at Arif Habib Limited, told Business Recorder.

She noted that imports picked up significantly during the fiscal year, while exports showed little to no growth and did not provide enough support. “Consequently, the weaker trade balance pushed the current account into deficit.”

Meanwhile, Saad Hanif of Ismail Iqbal Securities was of the view that the headline current account figure is broadly balanced and, at around 0.03% of GDP, “is not an immediate cause for concern”.

“However, the composition is less reassuring. A recovery in imports alongside contracting exports is the least favourable combination for the external account, as it suggests domestic demand is rebounding faster than the economy’s ability to generate foreign exchange,” he said.

Similar sentiments were expressed by Waqas Ghani, Head of Research at JS Global.

“On the surface, the current account position looks remarkably composed, but the composition of that composure is what demands scrutiny,” he said.

Massive deficit in June

On a monthly basis, Pakistan posted a current account deficit of $649 million in June 2026, compared with a surplus of $500 million in May 2026. In June 2025, the country had recorded a current account surplus of $220 million.

“The monthly deficit was primarily attributable to higher imports coupled with lower workers’ remittances in Jun 2026, resulting in the cumulative FY26 current account balance shifting into a modest deficit,” said Topline Securities.

Saad Hanif also noted that June’s current account deficit was the widest of the fiscal year, and if that pace continues into FY27, the annual deficit could widen significantly.

“That would warrant caution on the rupee and limit the SBP’s scope for further monetary easing from the current policy rate of 11.5%.

“The near-balanced headline figure should therefore not be interpreted as evidence of durable external stability; rather, it reflects stability underpinned by remittances, with a sustained recovery in exports remaining critical in the new fiscal year.”

During June 2026, exports of goods and services stood at $3.55 billion, compared with $3.2 billion in May 2026 and $3.3 billion in June 2025.

Imports of goods and services amounted to $7.08 billion in June 2026, compared with $6.42 billion in May 2026, while they were $5.92 billion in the corresponding month of last year.

Workers’ remittances clocked in at $3.48 billion during June 2026, easing from the record $4.25 billion received in May 2026 but remaining broadly in line with the $3.4 billion received in June 2025.

The SBP’s reserves stood at $18.5 billion at the end of FY26, compared with around $14.64 billion a year earlier, providing stronger external buffers amid improving macroeconomic stability.

Pakistan’s REER Index

Pakistan’s Real Effective Exchange Rate (REER) has increased to a seven-year high of 106.44 in June 2026 compared to 106.08 in May 2026.

“This reading remains at a 7-year high and is also above the 10-year average of 102.52,” said Topline Securities.

A REER above 100 means the country’s exports are uncompetitive, while imports are cheaper. The situation reverses when REER stands below 100 on the index.

Meanwhile, the Nominal Effective Exchange Rate Index (NEER) increased by 0.64% MoM in June 2026 to a provisional value of 38.14 from 37.9 in May 2026.

What is REER?

As per the central bank, REER is an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners.

“The prices of these baskets are expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner’s basket is weighted by its share in imports, exports, or total foreign trade,” the SBP website says.

Car sales surged by 39% to 155,631 units, sales of jeeps and pickups increased by 41% to 50,814 units, sales of trucks and buses rose by 67% to 7,439 units and sales of rickshaws rose by 25% to 985 units, respectively, according to the Pakistan Automotive Manufacturers Association (PAMA) data released on Monday.

Motorbikes and rickshaws went up by 30% to 1,972,077 units.

Meanwhile, sales of farm tractors slid by 1% to 28,791 units as growers are not willing to invest in the agriculture sector because of poor returns for a couple of years.

Speaking to Business Recorder, auto and bike analyst and expert Muhammad Sabir Shaikh said multiple reasons led to an increase in car sales in FY26, including increasing purchasing power of car lovers-cum-users, useful car financing schemes of banks suiting car buyers and more car assemblers coming with a vast variety of car variants and car types including fuel-driven, electric and hybrid.

“Bike sales have yet to recover. Before the Covid-19 pandemic, annual motorcycle sales, both official and unofficial, had surged to around 3 million units in 2016. Unfortunately, the purchasing power of middle-class consumers, who make up the bulk of motorcycle buyers, has declined significantly. As a result, many cannot afford an electric bike priced at around Rs300,000. In contrast, buyers in the car segment continue to purchase vehicles worth more than Rs10 million, reflecting a sharp increase in their purchasing power.”

He said Pakistan’s public transport system remains inadequate, particularly in Sindh, where even Karachi suffers from deteriorating road infrastructure. He urged both the federal and provincial governments to immediately invest in improving road infrastructure and expanding the public transport network.

“It has become extremely difficult for a middle-class family to afford a motorcycle today, even though it has become a necessity. With fuel prices remaining high, fares for auto-rickshaws and ride-hailing services have risen sharply, making motorcycle ownership increasingly essential,” Shaikh maintained.

Overseas workers’ remittances to Pakistan increased by 9% to $41.6 billion during Jul-June FY26, up from $38.3 billion in the previous fiscal year.

During June, remittances stood at $3.475 billion, according to data from the State Bank of Pakistan (SBP) released on Thursday.

In terms of growth, remittances declined by 18% on a month-on-month basis but were up 2% on a year-on-year basis.

Analysts attributed the annual increase to a combination of structural and policy factors.

Saad Hanif, Head of Research at Ismail Iqbal Securities, said the growth was driven by the continued shift from informal to formal banking channels following exchange company reforms and the crackdown on hawala/hundi, a stable rupee near Rs278 per US dollar that removed the incentive to delay or divert transfers, and a larger remitter base resulting from elevated GCC-bound emigration over the past two years.

“The corridor data reflects this breadth, with UAE up 12%, EU up 15% and others up 20% year-on-year, while incentive schemes provided additional support through the year,” he told Business Recorder

Waqas Ghani, Head of Research at JS Global Capital, said structural support from higher overseas employment, continued migration toward formal banking channels, and stable exchange rate dynamics continued to underpin inflows throughout the year.

Meanwhile, Sana Tawfik, Head of Research at Arif Habib Limited, said exchange rate stability, a narrow gap between interbank and open market rates, and administrative measures against illegal money transfer channels encouraged remittances through formal banking channels. She added that the increasing number of Pakistani workers going abroad had also contributed to higher inflows.

Remittances play a significant role in supporting the country’s external account, stimulating economic activity, and supplementing the disposable incomes of remittance-dependent households.

“The record inflows remain the anchor of Pakistan’s external account, fully absorbing a trade deficit that widened 21.6% year-on-year to $39.5 billion and keeping the current account in surplus,” Hanif said.

“This allowed SBP reserves to rise to $18.4 billion from $13 billion a year earlier, despite heavy debt repayments, supporting rupee stability and building room for eventual monetary easing.”

Ghani echoed the view, saying remittances remain the cornerstone of Pakistan’s external account as trade pressures increase.

Hanif said SBP projects workers’ remittances at $44 billion in FY27, with key monitorables being the Gulf conflict’s impact on GCC labour markets and the withdrawal of remittance incentive schemes.

“This historic milestone reflects the unwavering confidence of overseas Pakistanis and reinforces Pakistan’s external sector resilience, stronger foreign exchange buffers, and improving macroeconomic fundamentals,” said Adviser to the Finance Minister Khurram Schehzad on X.

“FY26 is a record achievement with the last 3 years’ growth being phenomenal, powered by millions of hardworking Pakistanis across the globe,” he added.

Earlier, SBP Governor Jameel Ahmad said the preliminary numbers suggested that the inflows of workers’ remittances would end up above $41.5 billion in FY26, higher than last year, despite the recent geopolitical crisis in the region.

Last week, SBP discontinued a government-backed incentive scheme that reimbursed banks for telegraphic transfer charges on workers’ remittances.

Similarly, SBP also decided to discontinue the Sohni Dharti Remittance Program (SDRP), ending the incentive scheme that rewarded overseas Pakistanis for sending remittances through formal banking channels.

Breakdown of remittances

Overseas Pakistanis in Saudi Arabia remitted the largest amount in June 2026, sending $830 million. The amount was up 1% compared to the $823 million sent by the expatriates in the same month last year. However, the amount was down by 19% compared to $1,025 million recorded in May 2026.

Inflows from the United Arab Emirates rose by 10% on a yearly basis, from $717 million in June 2025 to $792 million in June 2026. They decreased significantly by 21% on a monthly basis.

Remittances from the UK amounted to $515 million during June 2026, down by 20% compared to $645 million in May.

Overseas Pakistanis in the US sent $297 million in June, a monthly decrease of 15% from $349 million during May.

Meanwhile, remittances from European Union (EU) countries clocked in at $415 million in June, recording a decrease of 11% on a monthly basis from $466 million in May.

Pakistan’s headline inflation clocked in at 11.1% on a year-on-year (YoY) basis in June 2026, as shown by Pakistan Bureau of Statistics (PBS) data on Wednesday.

The consumer price index (CPI) was recorded at 11.7% in May 2026. The CPI stood at 3.2% in June 2025.

On a month-on-month basis, it decreased by 0.3% in June 2026 as compared to an increase of 0.5% in the previous month and an increase of 0.2% in June 2025.

During the last fiscal year 2025-26, inflation stood at 7.05% against 4.49% recorded in the same period last year.

“The YoY uptick in inflation has largely been driven by increases in energy and transportation costs due to rising oil prices amid ongoing geopolitical tensions,” said Arif Habib Limited (AHL), in a note.

Urban CPI inflation increased by 11.2% on a year-on-year basis in June 2026, as compared to an increase of 11.8% in the previous month and an increase of 3.0% in June 2025.

On a month-on-month basis, it decreased by 0.5% in June 2026 as compared to an increase of 0.7% in the previous month and an increase of 0.1% in June 2025.

Rural CPI inflation increased by 10.9% on a year-on-year basis in June 2026 as compared to an increase of 11.5% in the previous month and an increase of 3.6% observed in June 2025.

On a month-on-month basis, no changes were observed in June 2026 as compared to an increase of 0.3% in the previous month and an increase of 0.5% in June 2025.

Government expectations

In its latest monthly outlook, the Ministry of Finance noted that the recent easing of geopolitical tensions, due to the ongoing peace efforts in the Middle East, has improved global market sentiment.

Consequently, international crude oil prices have eased from their recent highs, which is expected to reduce imported inflationary pressures and help lower domestic fuel and transportation costs.

“Inflation is anticipated to remain within the range of 11-12% for June 2026,” it said, adding that lower international oil prices are also expected to support the external account by containing the oil import bill.

Last month, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) decided to keep the policy rate unchanged at 11.5%. It is assessed that inflation in June will remain in double digits for the next few months, before gradually easing subsequently.

Remittance inflow since Jan 2024

The inflow of overseas workers’ remittances into Pakistan stood at $4.251 billion in May 2026, the State Bank of Pakistan (SBP) data showed on Wednesday.

In terms of growth, remittances increased by 20.2% on a month-on-month basis and 15.4% on a year-on-year basis.

Cumulatively, workers’ remittances increased by 9.2% to $38.1 billion during Jul-May FY26, compared to $34.9 billion received during the same period last year.

“The strong growth was primarily driven by Eid-related seasonal inflows, as remittances typically increase during festive periods,” said Topline Securities in a note.

“We expect remittances in FY26E to clock in slightly above our target of $41 billion,” it added.

The 11MFY26 average remittance run-rate has now risen to $3.5 billion per month in FY26, compared to $3.2 billion in the prior year, said Waqas Ghani, Head of Research at JS Global, told Business Recorder, representing a 9% YoY improvement.

“This improvement continues to reflect structural factors like higher emigration volumes, sustained shift from hawala to formal banking channels, and relatively stable FX spreads in the interbank market.

“Regional geopolitical developments appear to have further accelerated remittance flows,” he added.

Pakistan had recorded its “highest-ever monthly remittance inflow in history”, said Adviser to the Finance Minister Khurram Schehzad on X.

“This is a resounding testament to the unwavering confidence of overseas Pakistanis, which is further strengthening the country’s economy and external stability.

“With the last month of the fiscal year, remittances are all set to surpass $41 billion for the first time in history!” he added.

Remittances play a significant role in supporting the country’s external account, stimulating Pakistan’s economic activity, and supplementing the disposable incomes of remittance-dependent households.

Meanwhile, the government promotes remittances through incentives and formal channels to sustain steady growth and ensure their role in economic stability.

Breakdown of remittances

Overseas Pakistanis in Saudi Arabia remitted the largest amount in May 2026, sending $1,025 million. The amount was up 12% compared to the $914 million sent by the expatriates in the same month last year. Moreover, the amount was up by 22% compared to $842 million in April 2026.

Inflows from the United Arab Emirates rose by 33% on a yearly basis, from $754 million in May 2025 to $1,007 million in May 2026. They increased significantly by 37% on a monthly basis.

Remittances from the UK amounted to $645 million during May 2026, up by 15% compared to $564 million in April.

Overseas Pakistanis in the US sent $350 million in May, a monthly increase of 10% from $317 million during April.

Meanwhile, remittances from European Union (EU) countries clocked in at $466 million in May, recording an increase of 8% on a monthly basis from $432 million in April.

Sales of jeeps and pickups surged by 39% to 39,002 units. Sales of trucks and buses increased by 81% to 5,890 units and by 28% to 797 units, respectively. Motorbikes and rickshaws rose by 32% to 1,619,841 units.

When it comes to sales of farm tractors, their sales slid by 7% to 23,116 units as both small growers and progressive growers are distraught on account of less crop output following a climate change and shortage of water and building housing schemes on agricultural lands.

Also read: Pakistan car sales jump 45% in July-March FY26

On a monthly basis, car sales in Pakistan jumped by 117% to 17,387 units in April 2025, against 8,004 units recorded in the same month the previous year.

Auto sector expert Muhammad Sabir Shaikh said inflation and price-hike in petrol did not impact on car users-cum-buyers.

“Generally, car users call for changing their vehicles after three to four years as their vehicles start acting up and maintenance of vehicles are way more costly than fuel costs,” he said.

Shaikh said motorcycle sales also recorded significant growth due to the lack of affordable public transport in the country. He was of the view that middle-class families increasingly rely on motorcycles as a cost-effective means of commuting and ensuring timely travel while cutting daily transportation expenses.

Also read: Car sales in Pakistan jump 43% in fiscal year 2024-25

Speaking about a fall in the tractor sales, he said for five to six years, farmers remained disturbed and they were unable to get proper prices of their respective crops.

“Therefore, they are not able to buy new tractors after cultivating crops as they did practice in the past,” Shaikh said.

The country’s trade deficit stood at $4.07 billion in April, up nearly 4% against $3.92 billion recorded in the same period the previous year.

Pakistan’s exports clocked in at $2.48 billion in April 2026, registering an increase of 14% as compared to $2.17 billion in April 2025.

Pakistan’s trade deficit rises 23% to $28bn in July-March

On the other hand, imports stood at $6.55 billion in April 2026, up 7.5% against $6.1 billion recorded in the same period the previous year.

On a monthly basis, Pakistan’s trade deficit jumped 43.5% against $2.84 billion recorded in March 2026. The significant increase came on the back of an over 28% increase in imports on a monthly basis, while exports grew by just 9.5%.

Meanwhile, Pakistan’s trade deficit significantly increased by 20.3% to $31.98 billion in the first ten months of the current fiscal year (10MFY26), as compared to a deficit of $26.59 billion in July-April of the previous fiscal year (10MFY25).

The trade deficit expanded year-on-year (YoY) in the said period, driven by higher imports and a decrease in exports.

Exports in 10MFY26 stood at $25.21 billion, down over 6% against $26.89 billion recorded in the same period of FY25.

Imports were recorded at $57.19 billion, up 7% against $53.48 billion in the same period last year.

According to data released by the Pakistan Automotive Manufacturers Association (PAMA), there was a substantial rise in the sales of all two-three-and-four wheelers, while the sales of farm tractors continued to decrease as usual for several months.

Car sales in Pakistan (excluding LCVs, Vans, and Jeeps) increased by 45% to 109,655 units in July-March FY26, as compared to the 75,397 units sold in the same period the previous year.

Sales of jeeps and pickups rose by 35% to 34,374 units. Sales of trucks and buses went up by 82% to 5,143 units and by 33% to 720 units, respectively. Motorcycles and rickshaws also increased by 31% to 1,429,501 units.

Moreover, sales of farm tractors fell by 13% to 20,292 units because of climate change following losses of crop output.

Shafiq Ahmed Shaikh, an automobile expert, said, “In my opinion, despite the emergence of EVs, ICE vehicles continue to dominate production and sales in Pakistan. The ICE industry has seen a massive rebound, with passenger car sales jumping by 45% and production rising by 51%. This surge is largely attributed to a more stable macroeconomic environment by this government and a significant decrease in interest rates, which has revived bank financing and corporate auto leasing”.

Also read: Localisation key to making cars affordable for Pakistan’s middle class: experts

He said the recovery was led by the trucks and buses segment, which saw production and sales spikes of 88% and 82%, respectively, reflecting increased logistics demand and economic activity. Jeep sales surged by 35%, driven by a growing preference for SUVs and functional pickups.

Shaikh further said a steady 31% increase in the two and three wheeler category indicated that the mass market relied heavily on traditional personal mobility.

“Whereas farm tractors are the only segment to decline (-13%), primarily due to declining of farm economics and lower crop prices due to current war between three countries, as exports are almost not happening,” he said.

Regarding stability and increase in demand, Shaikh was of the view the trends reflects that ICE vehicles remain the preferred choice, as EVs are typically more expensive.

“Furthermore, ICE vehicles offer ‘refuel and go’ convenience, whereas Pakistan’s charging network is very less in numbers, remains in its infancy, and is concentrated only in major cities.

“Resale value is another critical factor. In Pakistan, a car is considered a liquid financial asset with an established secondary market. In contrast, EV resale values remain uncertain, with early data from 2025–2026 suggesting some models lose 15–25% of their value within 18 months due to buyer skepticism regarding battery degradation and range anxiety.”

Moreover, Shaikh continued, serviceability also plays a major role. “While any roadside and local mechanic can fix an ICE engine, EVs require specialised workshops, trained mechanics and imported parts their parts prices are currently scarce and expensive.”

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 7.3% on a year-on-year (YoY) basis in March 2026, as shown by Pakistan Bureau of Statistics (PBS) data on Wednesday, a reading lower than the Ministry of Finance’s estimate of 7.5-8.5%.

The consumer price index (CPI) was recorded at 7% in February 2026. The CPI stood at 0.7% in March 2025.

On month-on-month basis, it increased by 1.2% in March 2026 as compared to an increase of 0.3% in the previous month and an increase of 0.9% in March 2025.

During nine months of the fiscal year, inflation stood at 5.67% against 5.25% recorded in the same period last year.

CPI inflation urban, increased by 7.4% on a year-on-year basis in March 2026 as compared to an increase of 6.8% in the previous month and an increase of 1.2% in March 2025.

On a month-on-month basis, it increased by 1.3% in March 2026 as compared to an increase of 0.3% in the previous month and an increase of 0.8% in March 2025.

Meanwhile, CPI inflation rural, increased by 7.2% on a year-on-year basis in March 2026, as compared to an increase of 7.3% in the previous month and no change observed in March 2025.

On a month-on-month basis, it increased by 1.0% in March 2026 as compared to an increase of 0.3% in the previous month and an increase of 1.1% in March 2025.

In its Monthly Economic Update & Outlook, March 2026, the Finance Division had anticipated inflation to remain within the range of 7.5-8.5% for March 2026.

“On the external front, high inflows of remittance are expected, particularly an increase in transfers associated with the Eid festival, although their trajectory will depend on economic conditions in the host countries,” it added.

Earlier, Arif Habib Limited, a brokerage house, expected inflation to settle at 7.6% YoY, compared to 0.7% YoY in March, 2025. “The higher YoY reading is largely attributable to a low base effect, as last year’s March printed a subdued number,” it added.

Similarly, JS Global, another brokerage house, anticipated inflation to clock in at 7.3%.

A REER above 100 means the country’s exports are uncompetitive, while imports are cheaper. The situation reverses when REER stands below 100 on the index.

As per SBP’s latest data, the REER decreased 0.74% month-on-month (MoM) in February 2026.

Also read: Pakistan’s REER index clocks in at 102.27 in February 2025

When compared with February 2025, the REER value increased 0.3%, when it stood at 102.25 (revised).

The SBP says a REER index of 100 should not be misinterpreted as denoting the equilibrium value of the currency.

“Movement of the REER away from 100 simply reflects changes relative to its average value in 2010 and is unrelated to its equilibrium value,” the central bank said in an explanatory note on the topic.

Meanwhile, the Nominal Effective Exchange Rate Index (NEER) decreased by 0.50% MoM in February 2026 to a provisional value of 37.64 from 37.83 in January 2026.

On a yearly basis, the NEER index decreased by 3.7% from the value of 39.09 in February 2025.

What is REER?

As per the central bank, REER is an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners.

“The prices of these baskets are expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner’s basket is weighted by its share in imports, exports, or total foreign trade,” the SBP website says.

Official data revealed that in terms of rupees, the total value of mobile phone imports stood at Rs364.684 billion during July-February 2025-26, compared to Rs278.162 billion, registering 31.10% growth.

On a month-on-month (MoM) basis, Pakistan’s mobile phone imports saw a 13.26% negative growth, totaling $155.547 million in February 2026, compared to $179.336 million in January 2026.

Year on year mobile imports witnessed a 17.95% growth when compared to $131.870 million in February 2025.

Pakistan imported mobile phones worth $1.494 billion in the fiscal year 2024-25, registering a fall of 21.31%, compared to $1.898 billion during the previous year, 2023-24.

In terms of Pakistani rupees, the total value of mobile phone imports stood at Rs417.351 billion during the fiscal year 2024-25.

This represents a 22.09% decline when compared to Rs535.690 billion in the same period of 2023-24.

Also read: Pakistan’s mobile phone imports surge 31.4% to $1.139bn in first seven months of FY2025–26

Overall telecom imports into Pakistan stood at $2.099 billion during the fiscal year 2024-25, reflecting a negative growth of 11.30% when compared to $2.366 billion during the same period of 2023-24.

The local manufacturing/ assembling plants manufactured/ assembled 1.69 million mobile handsets during the first month of the calendar year 2026 (January) 2026 compared to 0.47 million imported commercially

The local manufacturing/ assembling plants manufactured/assembled 30.21 million mobile handsets during the calendar year (January-December) 2025 compared to 2.37 million imported commercially.

The local manufacturing/ assembling plants manufactured/ assembled 1.69 million mobile handsets included 0.92 million smart phones and 0.77 million 2G phones.

Besides, as per the Pakistan Telecommunication Authority data, 71% of mobile devices are smartphones, and 29% are 2G on the Pakistan network.

Remittance inflow since Jan 2024

The inflow of overseas workers’ remittances into Pakistan stood at $3.29 billion in February 2026, the State Bank of Pakistan (SBP) data showed on Tuesday.

Remittances increased by 5.2% year-on-year (YoY), compared to $3.12 billion recorded in the same month last year. Monthly remittances were down 5% from $3.46 billion in January.

During the first eight months of the fiscal year (8MFY26), remittance inflows stood at $26.49 billion, up from $23.98 billion in 8MFY25, a jump of 10.5%.

Remittances play a significant role in supporting the country’s external account, stimulating Pakistan’s economic activity, and supplementing the disposable incomes of remittance-dependent households.

Meanwhile, the government promotes remittances through incentives and formal channels to sustain steady growth and ensure their role in economic stability.

Last year, SBP noted that since 2009, the Pakistan Remittance Initiative (PRI) has been working to enhance home remittances through formal channels in Pakistan. As a result of active engagements with financial institutions (FIs), the number of FIs on the PRI network has increased from around 25 in 2009 to more than 50 in 2024.

The FIs include conventional banks, Islamic banks, microfinance banks, and Exchange Companies (ECs).

Further, Electronic Money Institutions (EMIs) are also allowed to receive home remittances through banks. The number of international entities has increased from around 45 in 2009 to around 400 at present.

Breakdown of remittances

Overseas Pakistanis in the United Arab Emirates remitted the largest amount in January 2026, sending $696.2 million. The amount was up 6% on a yearly basis, and an increase of 6% compared to the $658 million sent by the expatriates in January.

Inflows from Saudi Arabia declined by 8% on a yearly basis, from $745 million to $685.5 million in February 2026.

Remittances from the UK amounted to $532 million during February 2026, down by 7% compared to $575 million in January 2025. YoY inflows from the UK were up by 7%.

Overseas Pakistanis in the US sent $319.5 million in February 2026, a YoY increase of 3%, and up 8% on a monthly basis.

Meanwhile, remittances from European Union (EU) countries clocked in at $395 million in February, recording a significant increase of 15% on a yearly basis.

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 7% on a year-on-year (YoY) basis in February 2026, the highest since October 2024, showed Pakistan Bureau of Statistics (PBS) data on Monday, a reading in line with the Ministry of Finance’s estimate of 6-7%.

The consumer price index (CPI) was recorded at 5.8% in January 2026. The CPI stood at 1.5% in February 2025.

On month-on-month basis, it increased by 0.3% in February 2026 as compared to an increase of 0.4% in the previous month and a decrease of 0.8% in February 2025.

This took 8MFY26 inflation at 5.46% against 5.85% in 8MFY25.

CPI inflation (Urban) increased by 6.8% on year-on-year basis in February 2026 as compared to an increase of 5.8% in the previous month and an increased of 1.8% in February 2025.

On month-on-month basis, it increased by 0.3% in February 2026 as compared to an increase of 0.2% in the previous month and a decrease of 0.7% in February 2025.

CPI inflation (Rural) increased by 7.3% on year-on-year basis in February 2026 as compared to an increase of 5.8% in the previous month and 1.1% in February 2025.

On month-on-month basis, it increased by 0.3% in February 2026 as compared to an increase of 0.6% in the previous month and a decrease of 1.1% in February 2025.

In its Monthly Economic Update & Outlook, February 2026, the Finance Division had seen February inflation figures at 6-7%.

Earlier, Optimus Capital Management, a brokerage house, said that Pakistan’s inflation is set to edge higher in February 2026, with expectations of 7.4% YoY, reflecting pressures from rising electricity and gold prices.

Last month, the State Bank of Pakistan (SBP) decided to keep its benchmark policy rate unchanged at 10.5% in its first Monetary Policy Committee (MPC) meeting of 2026.

The decision was against the market expectations, which was hoping for a a rate cut.

SBP Governor Jameel Ahmad announced the MPC decision in a press conference. Inflation in Pakistan could be above 7% in the current fiscal year’s second half, he said.

The government expects the Consumer Price Index (CPI) to be in the range of 5-7% for the full fiscal year 2025-26.

“Inflation is expected to remain within the range of 6-7% in February,” Federal Ministry of Finance said in its latest monthly economic update and outlook, February 2026.

Also read: Pakistan’s inflation to clock in at 7.4% in February, highest in 18 months: report

“On average, during July-January FY26, it [inflation] stood at 5.2% as against 6.5% during the same period last year,” the monthly outlook read.

The ministry report stated that the economic activity was expected to maintain its upward trajectory in the ongoing fiscal year (FY26), supported by sustained macroeconomic stability, easing inflationary pressures, and an improved fiscal position.

The accommodative monetary policy, alongside continued fiscal consolidation and structural reforms, is likely to reinforce business confidence and private sector activity, according to the report.

“Growth is projected to be driven by a rebound in large-scale manufacturing (LSM), improved remittances, and resilient agricultural performance, while the external sector is expected to remain manageable amid stable exchange rate and contained current account pressures,” it said.

“Meanwhile, downside risks persist, particularly from geopolitical uncertainties and global commodity price volatility. However, the prudent macroeconomic management is expected to safeguard the stability.”

Also read: Investor count surpasses 500,000 at Pakistan Stock Exchange

Pakistan economic entered the third quarter of FY26 with improved macroeconomic fundamentals. Exchange rate stability, sustained growth in workers’ remittances, and rising IT exports have contributed to a manageable current account position‒collectively strengthening the external sector position.

“Further, fiscal consolidation has improved, with surplus in both fiscal and primary balances. In parallel, a sizeable portion of public debt was retired ahead of schedule marking a significant step in prudent debt management…

“Overall, the growth prospects have improved significantly, with momentum likely to strengthen in the remaining fiscal year, leading towards sustainable economic growth,” the report said.

In January 2026, the MNCs’ profit outflow from Pakistan stood at $118.9 million, 15.5% higher compared to January 2025 and 34% up compared to the previous month of December 2025, according to State Bank of Pakistan’s (SBP) data released on Thursday.

Foreign firms sent profit and dividend worth $102.39 million in January 2025 and $88.8 million in December 2025.

MNCs operating in power sector dispatched the highest amount of profit and dividend at $41.1 million in January 2026, followed by companies running in transport sector at $24.5 million in the month. Food companies repatriated $18.7 million and communication firms sent $14.6 million in the month under review.

Cumulatively in the first seven months of FY26; foreign companies working in power sector sent the single largest profit and dividend worth $400.2 million, followed by financial businesses at $371.3 million.

Companies operating in food sector sent $142.4 million and $132.3 million from communication sector in 7MFY26. Beverages, tobacco and cigarette, chemicals, petroleum refineries, oil and gas exploration, pharmaceutical & OTC products, electronic, transport equipment (automobiles), transport, and storage facilities recorded the repatriation of profit in range of $14 million to $91 million in the seven months.

Food, power, oil and gas exploration, financial business and transport were the top five sectors dispatchers profit and dividend in the range of $85.5 million to $263 million in the same seven month of the previous fiscal year (FY25).

The repatriation of profit and dividend has surged apparently in the backdrop of the increased availability of foreign exchange (FX) reserves in the country and announcement of profit and dividend by companies listed at the Pakistan Stock Exchange (PSX) and others.

JS Global Capital, Country Head Sales, Syed Faran Rizvi recalled the then sharp decline in FX reserves had kept MNC dividends parked in Pakistan during FY23.

However, as reserves began to build up again, there was a massive surge in the overall total repatriation, according to Rizvi, rocketing from just $331 million in FY23 to over $2.2 billion in FY24 and steady at similar levels in FY25 and FY26.

“A huge driver of this jump was the food sector, which exploded from practically nothing ($0.7 million) in FY23 to a leading $306.1 million by FY25 and continued to remain among top repatriates in FY26.

“We also saw impressive growth in tobacco & cigarettes, which climbed rapidly to $130.5 million, while beverages and chemicals maintained strong, consistent upward trends over the three-year period (FY23 to FY25),” Rizvi said.

The country’s trade balance, the gap between exports and imports, was recorded at a deficit of $17.19 billion in July-January of the previous fiscal year (7MFY25).

The trade deficit expanded year-on-year (YoY) in the said period, driven by higher imports and a decrease in exports.

Exports in 7MFY26 stood at $18.20 billion, down 7.1% against $19.58 billion recorded in the same period of FY25.

Also read: Pakistan’s trade deficit surges 24% YoY to $3.7bn in December 2025

Imports were recorded at $40.23 billion, up 9.42% against $36.77 billion in the same period last year.

Exports cross $3 billion in January 2026

Meanwhile, Pakistan’s exports clocked in at $3.06 billion in January 2026, up 3.73% against $2.95 billion recorded in January 2025.

On the other hand, imports stood at $5.79 billion in January 2026, down 1.41% against $5.87 billion recorded in the same period the previous year.

Also read: Inflation in Pakistan clocks in at 5.8% in January 2026

In January 2026, the country’s trade deficit stood at $2.72 billion, down 6.61% against $2.92 billion in January 2025.

On a monthly basis, Pakistan’s trade deficit declined 28.53% against $3.81 recorded in December 2025.

Rupee's Performance Against US Dollar Since 04 March 2025

The Pakistani rupee posted marginal gain against the US dollar in the inter-bank market on Monday.

At close, the local currency settled at 279.76, a gain of Re0.01 against the greenback.

On Friday, the local unit closed at 279.77.

Pakistan’s headline inflation clocked in at 5.8% on a year-on-year (YoY) basis in January 2026, showed Pakistan Bureau of Statistics (PBS) data on Monday, a reading in line with the Ministry of Finance’s estimate of 5-6%.

The consumer price index (CPI) was recorded at 5.6% in December 2025. The CPI stood at 2.4% in January 2025.

The country’s trade deficit significantly increased by 28.22% to $22.04 billion in the first seven months of the current fiscal year (7MFY26), as compared to the same period of the previous year, data released by the Pakistan Bureau of Statistics (PBS) showed.

Trade balance, the gap between exports and imports, was recorded at a deficit of $17.19 billion in July-January of the previous fiscal year (7MFY25).

The dollar clung to its gains on Monday as investors weighed what a Federal Reserve under Kevin Warsh ​might look like, with his preference for a smaller balance sheet.

The yen was also back on traders’ radars, ‌after Japanese Prime Minister Sanae Takaichi over the weekend talked up the benefits of a weaker yen in a campaign speech, in a tone at odds with her finance ministry that has worked to stem the currency’s declines.

US President Donald Trump’s pick of Warsh as the next Fed Chair sparked a wave of selling across risky assets and sent precious metals tumbling on Friday, while the dollar clawed back its losses ‌from earlier last week.

While investors think Warsh will be inclined to cut rates, they expect him ​to rein in the Fed’s balance sheet, which is typically supportive for the dollar as it reduces the money supply in the market.

The greenback remained on the front foot in early Asia trade on Monday, leaving the euro firmly away from the $1.20 ‍level as it last stood at $1.1848.

Sterling was down 0.05% to $1.3680, while the dollar index steadied at 97.22 after jumping 1% on Friday.

Oil prices, a key indicator of currency parity, fell more than 4% on Monday after U.S. President Donald Trump said Iran was “seriously talking” with Washington, signalling a de-escalation of tensions with an OPEC member, while a stronger dollar also weighed on prices.

Brent crude futures were down $3.34, or 4.8%, at $65.98 per barrel at 1113 GMT. US West Texas Intermediate crude fell $3.37, or 5.2%, to $61.84 per barrel.

Brent and WTI fell after posting their biggest monthly increase since 2022 in January, as risks of a military strike on Iran receded after Trump’s weekend comments. Brent gained 16% in January, while WTI rose by 13%.

Inter-bank market rates for dollar on Monday

BID Rs 279.76

OFFER Rs 279.96

Open-market movement

In the open market, the PKR lost 2 paise for buying and gained 2 paise for selling against USD, closing at 280.24 and 280.80, respectively.

Against Euro, the PKR gained 1.56 rupee for buying and 1.64 rupee for selling, closing at 332.16 and 335.20, respectively.

Against UAE Dirham, the PKR lost 4 paise for buying and gained 6 paise for selling, closing at 76.53 and 77.23, respectively.

Against Saudi Riyal, the PKR remained unchanged for buying and gained 5 paise for selling, closing at 74.80 and 75.37, respectively.

Open-market rates for dollar on Monday

BID Rs 280.24

OFFER Rs 280.80

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 5.8% on a year-on-year (YoY) basis in January 2026, showed Pakistan Bureau of Statistics (PBS) data on Monday, a reading in line with the Ministry of Finance’s estimate of 5-6%.

The consumer price index (CPI) was recorded at 5.6% in December 2025. The CPI stood at 2.4% in January 2025.

On month-on-month (MoM) basis, it increased by 0.4% in January 2026 as compared to a decrease of 0.4% in the previous month and an increase of 0.2% in January 2025.

This took 7MFY26 inflation at 5.24% vs 6.50% in 7MFY25.

CPI inflation (Urban) remained stable at 5.8% on year-on-year basis in January 2026 as compared to the previous month and an increased by 2.7% in January 2025.

On MoM basis, it increased by 0.2% in January 2026 as compared to a decrease of 0.4% in the previous month and an increase of 0.2% in January 2025.

CPI inflation (Rural) increased by 5.8% on year-on-year basis in January 2026 as compared to an increase of 5.4% in the previous month and 1.9% in January 2025.

On MoM basis, it increased by 0.6% in January 2026 as compared to a decrease of 0.6% in the previous month and an increase of 0.2% in January 2025.

In its Monthly Economic Update & Outlook January 2026, the Finance Division had seen January inflation figures at 5-6%.

Last week, the State Bank of Pakistan (SBP) decided to keep its benchmark policy rate unchanged at 10.5% in its first Monetary Policy Committee (MPC) meeting of 2026.

The decision was against the market expectations, which was hoping for a a rate cut.

SBP Governor Jameel Ahmad announced the MPC decision in a press conference.

Inflation in Pakistan could be above 7% in the current fiscal year’s second half, he said.

The country’s gross domestic product (GDP) would grow by 3.75% to 4.75% this year, Ahmad envisaged.

A REER above 100 means the country’s exports are uncompetitive, while imports are cheaper. The situation reverses when REER stands below 100 on the index.

As per SBP’s latest data, the REER decreased nearly 1.09% month-on-month (MoM) in December 2025.

When compared with December 2024, the REER value increased 0.06%, standing at 103.67.

“Pakistan REER has decreased to 103.73 in December 2025, higher than the last 10-year average of 103.0,” said Topline Securities. “A rising REER, i.e. greater than 100, suggests that the relative value of the home currency is becoming overvalued compared to peer countries,” it added

Meanwhile, the SBP says a REER index of 100 should not be misinterpreted as denoting the equilibrium value of the currency.

“Movement of the REER away from 100 simply reflects changes relative to its average value in 2010 and is unrelated to its equilibrium value,” the central bank said in an explanatory note on the topic.

Meanwhile, the Nominal Effective Exchange Rate Index (NEER) decreased by 0.54% MoM in December 2025 to a provisional value of 37.97 from 38.18 in November 2025.

On a yearly basis, the NEER index decreased by 3% from the value of 39.15 in December 2024.

What is REER?

As per the central bank, REER is an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners.

“The prices of these baskets are expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner’s basket is weighted by its share in imports, exports, or total foreign trade,” the SBP website says.

The deficit follows a surplus of $98 million recorded in November 2025, which was originally reported to be at $100 million, and a surplus of $454 million in December 2024.

The deficit came on the back of a significantly higher import bill during the month.

In December 2025, the country’s total export of goods and services amounted to $3.69 billion, up nearly 20% as compared to $3.08 billion in the previous month.

Meanwhile, total imports totalled $7.04 billion in December 2025, a decrease of nearly 24%, compared to $5.69 billion in November 2025, according to SBP data.

During December 2025, Pakistan’s workers’ remittance inflows totalled $3.59 billion, compared to $3.19 billion in November 2025, representing a 13% increase on a monthly basis.

During the H1FY26, the current account recorded a cumulative deficit of $1,174 million, as compared to a surplus of $957 million in the same period last year.

“The deficit comes mainly because of a sharp widening in the goods trade gap,” Saad Hanif, Head of Research at Ismail Iqbal Securities, told Business Recorder.

He added that higher imports, weaker exports and deterioration in services balance “outweighed still-strong remittance inflows, reversing November’s surplus”.

Waqas Ghani, Head of Research at JS Global, echoed similar sentiments.

“The deficit is due to a sharp rise in imports despite lower global commodity prices and higher remittances,” said Ghani.

“We expect the current account to close the ongoing fiscal year with a deficit, driven by rising imports,” he added.

Ghani noted that during 1HFY26, imports rose 12% YoY, reflecting economic normalisation and higher intermediate overall demand, while exports declined 5% YoY, keeping the trade gap wide at $15.8 billion.

Meanwhile, Pakistan’s foreign exchange reserves (excluding CRR/SCRR) rose to $16.19 billion, reflecting a substantial 36% rise year-on-year, indicating stronger external buffers despite ongoing structural pressures on the current account.

The country’s startups closed 16 deals of which 11 were disclosed, with total reported funding of around S74.23 million comprising both the equity only deals of $8.18 million and hybrid finance of $ 66.04 million, the report said.

The year 2025 witnessed a sharp shift towards hybrid financing, in contrast to 2024 that remained equity-heavy amid prolonged funding drought conditions.

• Equity financing involves selling a stake in the company to investors in exchange for capital, which does not require repayment but dilutes the founders’ ownership and often gives investors a say in decision-making.
• Debt financing means borrowing money that must be repaid over time with interest, allowing founders to retain full ownership, though it creates fixed repayment obligations that can strain cash flows, especially in early stages.
• Hybrid financing combines elements of both equity and debt.

A total of 11 disclosed transactions were recorded across pre-seed, seed, and Series A stages, along with five additional rounds with undisclosed or quiet ticket sizes. These included XpertFlow, Blink, VMNebula, Lean Outset, and Chrio.

The $74.23 million funding was primarily driven by large funding rounds such as Haball’s $52 million and MedIQ’s $6 million. These were complemented by seed-stage investments in BusCaro, Metric–Max CF-AI, ScholarBee, NewVative, Shadiyana, Qist Bazaar, and myco.io.

Read more: Pakistani fintech Haball secures $52mn funding to grow Islamic finance business, plans Middle East foray

Key startup sectors included fintech and healthtech, edtech, wedding-tech, sports tech, mobility, logistics, energy, internet of things (IoT), entertainment, and e-commerce.

The final quarter of 2025 proved to be a signal-setting period rather than a volume-driven one. While the headline deal count remained subdued and most of the $74.23 million in equity and hybrid financing had been deployed earlier in the year, the last quarter revealed decisive structural shifts.

Notably, new categories emerged as alternative debt and Shariah-compliant capital moved into the mainstream, while exits validated growth-to-liquidity pathways.

Female founders and mixed-gender teams remained central to the 2025 deal flow. Female-founded and co-founded startups—including Shadiyana, BusCaro, Metric, MedIQ, and Lean Outset—accounted for eight of the 11 disclosed deals. These spanned pre-seed, seed, and Series A rounds across fintech, mobility, healthtech, and wedding-tech sectors.

Mehwish Salman Ali, Founder and CEO of Data Vault Pakistan and ZahanatAI, said the rise of women-led startups was an encouraging sign for the country’s entrepreneurial landscape, as “this trend will not only inspire more female professionals to launch startups but will also empower women employees within startups to unleash their talent with creativity and dedication”.

She added that women-driven initiatives were likely to introduce new ideas and generate sustainable economic activity across the country, extending beyond urban centers into rural areas.

“I am optimistic the trend will continue n 2026 and more female entrepreneurs will lead the startups, particularly in tech and artificial intelligence,” she remarked.

The final quarter also highlighted diversification in venture-scale financing. KalPay secured structured Shariah-compliant debt from Accelerate Prosperity, underscoring the shift of Shariah-compliant debt from a niche instrument to the mainstream.

This development positions debt financing as a viable structure for fintech startups, particularly in education and BNPL-focused ventures, expanding access to capital beyond traditional equity routes.

Meanwhile, Agrilift and Echooo AI—both backed by Accelerate Prosperity—reflected a parallel trend of debt financing diversification across non-fintech verticals, including agri-tech, climate-linked productivity, and creator economy infrastructure.

Collectively, these developments signal growing confidence in debt as a financing tool, enabling broader capital deployment across climate, agriculture, and digital services as the ecosystem moves toward 2026.

Azfar Hussain, Project Director at the National Incubation Center Karachi, said 2025 marked a period of correction and maturity for Pakistan’s startup ecosystem. He noted that capital became more selective, filtering out hype-driven ventures while strengthening founders focused on solving real-world problems.

Looking ahead, he said growth in 2026 would increasingly favour founders who invest in governance, product depth, and regional scalability rather than pursuing rapid expansion or vanity metrics. According to him, the ecosystem is entering a phase where business-first thinking outweighs fundraising-first narratives.

He further emphasised that startups with a strong understanding of compliance, balance sheets, and institutional collaboration would be best positioned, as capital would increasingly flow toward ventures combining impact, resilience, and commercial viability.

Last week, another think tank Data Darbar reported that startups in Pakistan had observed a modest recovery in equity funding during 2025, with capital raised climbing to $36.6 million from $22.5 million a year earlier, reflecting an increase of nearly 63%.

However, despite the uptick, funding levels remain well below historical peaks, as shown by data released by Data Darbar.

“Based on press or social media announcements, startups raised approximately $36.6 million in equity capital across 10 rounds, while four additional transactions did not disclose dollar values,” read the report.

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 5.6% on a year-on-year (YoY) basis in December 2025, showed Pakistan Bureau of Statistics (PBS) data on Thursday, a reading in line with the Ministry of Finance estimate of 5.5-6.5%.

The consumer price index (CPI) was recorded at 6.1% in November 2025. The CPI stood at 4.1% in December 2024.

On a month-on-month basis, it decreased by 0.4% in December 2025, as compared to an increase of 0.4% in the previous month and an increase of 0.1% in December 2024.

This takes the 6MFY26 inflation reading at 5.15% against 7.22% in 6MFY25.

CPI inflation (Urban) increased by 5.8% on a year-on-year basis in December 2025, as compared to an increase of 6.1% in the previous month and 4.4% in December 2024.

On a month-on-month basis, it decreased by 0.4% in December 2025 as compared to an increase of 0.5% in the previous month and a decrease of 0.1% in December 2024.

CPI inflation (Rural) increased by 5.4% on a year-on-year basis in December 2025, as compared to an increase of 6.3% in the previous month and 3.6% in December 2024.

On a month-on-month basis, it decreased by 0.6% in December 2025, as compared to an increase of 0.2% in the previous month and an increase of 0.3% in December 2024.

In its monthly outlook released on Wednesday, the Ministry of Finance has projected that inflation readings will remain in the range of 5.5% to 6.5% in December 2025.

“Inflation is projected to remain moderate, in the range of 5.5-6.5% in December, primarily reflecting base effect,” it said.

However, the reading is lower than the expectations of several brokerage houses.

Topline Securities expected Pakistan’s CPI for December 2025 to clock in at 5.75-6.25% YoY compared to 6.15% in November 2025 and 4.07% in December 2024. “On a MoM basis, inflation for December 2025 is projected at -0.18%”.

Meanwhile, JS Global expected CPI to clock in close to 6.0% for December 2025. “For 1HFY26, average inflation is likely to clock in at ~5.2%, compared to 7.3% during the same period last year,” it said.

“This is 2.15% more than the corresponding number of Q1 2024-25,” said the federal minister in a social media post.

“This defines a qualitative change in the trajectory of GDP compared to 2024-25…. More encouraging is that it is coming from Industrial growth, which in 2025-26 Q1 is 9.38%, which in Q1 of 2024-25 was 0.12%.

“It should not be ignored that this growth is coming despite the 2025 flood shock and absorption of all fiscal tightening, energy subsidy withdrawal, and food inflation,” he added.

Pakistan posted GDP growth of 3.04% during FY2025, estimates released by the Pakistan Bureau of Statistics (PBS) in October showed. The growth was higher than the 2.68% estimated by the National Accounts Committee (NAC) during the previous meeting.

According to NAC, the overall size of the economy in FY2025 stood at Rs113.7 trillion, i.e. $407.2 billion, as compared to Rs105.2 trillion, i.e. $371.8 billion, in the previous year.

Further, per capita income in Rupees is 506,188 or $1,812, the NAC data showed.