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.

Chairing a high-level meeting in Islamabad, the prime minister was presented with a report on austerity and energy conservation measures, according to a statement issued by the Prime Minister’s Office (PMO).

Shehbaz noted that uncertainty continued to persist in the region and instructed relevant authorities to formulate a comprehensive contingency plan to ensure timely action if needed.

“The national economy is currently stable by the grace of Allah, but preparations must be in place to address any emerging challenges,” the premier said.

The prime minister appreciated the public’s cooperation in previous austerity and energy-saving campaigns, particularly efforts aimed at conserving petroleum products and energy.

“The government’s timely and effective strategy had ensured smooth fuel supplies across the country despite regional uncertainties,” he said.

Shehbaz further stated that the government had protected ordinary citizens, including motorcyclists, rickshaw drivers and transporters, from the adverse effects of rising fuel prices through targeted subsidies.

He directed federal and provincial authorities to take strict action against elements involved in creating an artificial shortage of petroleum products.

During the meeting, officials informed the prime minister that Pakistan currently possessed sufficient petroleum reserves to meet domestic requirements and that arrangements had been made to ensure uninterrupted supplies in the future.

The meeting was attended by federal ministers Ahad Cheema, Muhammad Aurangzeb, Ali Pervaiz Malik and Awais Leghari, Minister of State Bilal Azhar Kayani, Special Assistant to PM Tariq Bajwa, State Bank of Pakistan Governor Jameel Ahmad and other senior officials.

Winding up the budget debate in the Sindh Assembly, the chief minister stated that the province managed to maintain strict fiscal discipline despite facing a budget deficit of Rs344 billion, reduced federal fiscal space, and unexpected expenditures exceeding Rs95 billion during the outgoing year.

“Administrative expenditures were slashed by more than Rs62 billion, allowing resources to be redirected toward development, social welfare, and economic growth initiatives,” he noted.

Presenting a comprehensive vision for the province’s future, CM Murad announced plans to develop Keti Bandar as a major logistics hub through public-private partnerships, establish the Sindh International Financial Centre, create a province-wide Green Energy Network, and introduce a new agricultural financing framework to empower small farmers.

He unveiled an Annual Development Programme (ADP) of Rs720 billion for the next financial year, which includes Rs206 billion earmarked for Karachi to complete more than 1,800 development schemes.

Showcasing the achievements of the outgoing fiscal year 2025-26 through a detailed pictorial presentation, the chief minister highlighted completed projects in healthcare, education, irrigation, and infrastructure. He specifically pointed to the success of the Sindh People’s Housing for Flood Affectees (SPHF) programme, describing it as the world’s largest owner-driven housing initiative, with one million houses completed and another 600,000 currently under construction.

“Growing international confidence in Sindh’s strategy was evident as the World Bank approved projects worth around $1.7 billion for the province during the past two and a half months,” he added.

Responding to opposition’s criticism and what he termed factual inaccuracies, CM Murad rejected claims that quality healthcare was concentrated only in Karachi, citing specialised services and treatment statistics from facilities in Gambat, Sukkur, and Hyderabad.

He also dispelled assertions regarding historical spending on Karachi, clarifying that records showed past local administrations spent Rs33 billion rather than the Rs300 billion claimed.

The chief minister criticised successive federal governments for announcing massive development packages for Karachi—including past promises of Rs62 billion and Rs1.1 trillion—that never fully materialised, noting that current federal support remains limited to a few road projects.

Addressing remarks made during the session regarding national unity and historical legacies, CM Murad recalled the deep roots of Quaid-i-Azam Muhammad Ali Jinnah in Sindh and Karachi, urging political leaders to avoid divisive rhetoric. He maintained that Sindh continues to embody the values of inclusion and coexistence, and called for mutual respect for the historical contributions of all communities toward national cohesion.

The agreements were signed as part of ongoing cooperation between the two brotherly countries in the energy sector, according to a press release issued by the Ministry of Energy (Power Division).

The agreements reflect the shared commitment of both countries to deepen institutional collaboration, promote knowledge exchange, and strengthen technical cooperation across key areas of the power sector.

The MoUs were signed between Pakistani and Turkish energy sector entities, Independent System and Market Operator (ISMO) and Energy Exchange Istanbul (EPIAS), ISMO and the Turkish Electricity Transmission Corporation (TEIAS), and the Power Planning and Monitoring Company (PPMC) and the Turkish Electricity Distribution Corporation (TEDAS).

The agreements establish formal frameworks for cooperation in areas including post privatisation governance framework, electricity market development, ancillary services regulations formulation, power system operations, transmission planning, distribution sector management, digitalisation, capacity building, institutional strengthening, and the exchange of technical expertise.

Federal Minister for Energy (Power Division) Sardar Awais Ahmad Khan Leghari welcomed the signing of the MoUs and noted that these partnerships represent an important step towards strengthening Pakistan’s energy institutions through collaboration with leading Turkish counterparts.

“Pakistan is committed to learning from Türkiye’s successful experience in electricity market reform, transmission system development, distribution sector modernisation, and the integration of advanced technologies into power sector operations,” he emphasised.

The minister highlighted the importance of learning from Turkish experience regarding the post privatisation framework development and managing the power sector in privatised environment.

He highlighted that cooperation between sector institutions will facilitate the transfer of practical knowledge, operational experience and best practices that can support Pakistan’s ongoing efforts to improve efficiency, enhance service delivery, strengthen governance, and build a more sustainable and competitive power sector.

The Turkish side expressed its commitment to supporting long-term institutional cooperation and welcomed the opportunity for both countries to work closely.

The signing of the MoUs shall pave the way for joint technical initiatives, expert exchanges, training programme, study visits and collaborative projects aimed at advancing energy sector development in Pakistan.

The government of Pakistan views these agreements as an important outcome of the Pakistan–Türkiye energy dialogue and a concrete demonstration of the growing strategic partnership between the two brotherly nations in the energy sector.

The approval was given in a meeting held in Islamabad on Thursday with Minister for Planning and Development Ahsan Iqbal in the chair, the Press Information Department (PID) said in a press release.

The projects presented before the forum covered diverse sectors, including mineral exploration, healthcare, digital infrastructure, security, energy, robotics, and road connectivity.

Chairing the meeting, Minister for Planning Iqbal emphasised that the approved projects are aligned with the vision of URAAN Pakistan, focusing on digital transformation, modern infrastructure, connectivity, and sustainable economic growth.

The minister highlighted that strategic investments in technology and infrastructure are essential for accelerating Pakistan’s journey towards a knowledge-based and competitive economy.  

Three projects related to the Information Technology sector were presented before the forum. The project titled “ Establishment of Emerging Technologies Data Centre ” worth Rs. 7930 million was accorded in-principle approval and recommended to ECNEC for further consideration. The project aims to establish a national Emerging Technologies Data Centre to provide secure, sovereign, and government-owned Artificial Intelligence (AI) and high-performance computing infrastructure for Pakistan. The facility will support artificial intelligence, cloud computing, big data analytics, and digital services for government institutions, academia, research organizations, and the private sector. The project will strengthen data security and digital sovereignty, reduce reliance on foreign cloud providers, support indigenous AI solutions, and promote innovation, capacity building, and growth of the digital economy.

Another Information Technology sector project, “ National Artificial Intelligence Ecosystem Development Program (NAIEDP) ” worth Rs. 13,000 million, was accorded in-principle approval and recommended to ECNEC for further consideration. The project includes a comprehensive feasibility study through a specialized consultancy firm to assess the AI ecosystem, stakeholder landscape, technical and infrastructure requirements, financial and market viability, legal and governance frameworks, and risk mitigation measures. The study will lead to the development of an upgraded and implementation-ready PC-I to support informed decision-making and successful execution of the project.

The third IT sector project presented was,“ Pakistan Communication Satellite – 2 (PakSat-2) ” worth Rs. 37192.282 million, was accorded in-principle approval and recommended to ECNEC for further consideration. The project includes the development and deployment of a communication satellite in Geostationary Orbit (GEO) along with upgrading existing Ground Control and Operations Centers at Lahore and Karachi. The project will enhance satellite command, control, tracking, and operational capabilities by utilizing SUPARCO’s existing technical expertise and infrastructure.

A project related to the Physical Planning & Housing sector, “ Acquisition of Land and Hiring of Consultancy Firms for Feasibility Study for Establishment of Special Protection Unit (SPU) In ICT Police Islamabad ” worth Rs. 9412.984 million, was accorded in-principle approval and recommended to ECNEC for further consideration. The project includes acquisition of 26.76-kanal (16,189.80-Square Yard) land and hiring of consultancy firms for feasibility study and detailed engineering design for establishment of the SPU in Sector H-11, Islamabad.

A Power sector project presented by the Government of AJK namely “ Strengthening & Improvement of Electricity Supply Network in AJ&K ” worth Rs. 9999.981 million, was also accorded in-principle approval by the forum and recommended to ECNEC for further consideration. The proposed project focuses on reconductoring, load bifurcation, and upgradation of overloaded 11 kV feeders to improve voltage profile, system reliability, and reduce power outages. It also includes installation of new distribution transformers, augmentation of existing transformers, and establishment of repair workshops to enhance operational efficiency and timely restoration of power supply

Four projects related to the Transport and Communications sector were presented and accorded in-principle approval & recommended to ECNEC. These included “C onstruction of Lalamusa Bypass (N-5) ” worth Rs. 20,354.319 million and “ Up-gradation of Track and Allied Infrastructure on ML-3; Rohri–Sibi–Quetta–Koh-e-Taftan Section (996 Kms) ” worth Rs. 278,618.591 million. The ML-3 project is proposed to be financed through PSDP, with interim funding to be provided through bridge financing by Reko Diq Mining Company (RDMC) and the Government of Pakistan. The project includes track renewal, rehabilitation of embankments and bridges, replacement of turnouts, and construction of 11 new railway stations between Spezand and Taftan. The project will be implemented in two phases, with critical infrastructure works planned during Phase-I (2026–2030) and remaining priority works during Phase-II (2031–2033).

Another Transport and Communications sector project “ Construction of Mashkel - Chedgi Road (108.5 Km) CSR-2025 (Revised) ” worth Rs. 43647.080 million was accorded in-principle approval and recommended to ECNEC for further consideration. The project, proposed to be financed through 90% SFD and 10% PSDP, includes construction of a 4.1-kilometre-long tunnel along with approach roads, bridges, culverts, slope protection works, retaining walls, erosion control works, and allied infrastructure facilities.

Another revised T&C sector project, “C onstruction of Rathoa Haryam Bridge Across Reservoir channel on Mirpur-Islamgarh Road, Mirpur AJ&K ” worth Rs. 10867.189 million, was accorded in-principle approval and recommended to ECNEC for further consideration. The project involves construction of the Rathoa Haryam Bridge across the reservoir channel on Mirpur–Islamgarh Road along with associated road infrastructure. The road component includes construction of a 4.242-kilometer-long, two-lane approach road with a 7.3-meter-wide carriageway, inner and outer shoulders, and 400 meters of concrete retaining walls designed in accordance with AASHTO Policy 2004 standards. The bridge component comprises a 2.975-kilometer-long bridge divided into three zones based on geotechnical conditions, pier heights, and construction methodology to ensure structural stability and efficient execution.

While reviewing the project, Iqbal stated that the project was a long-delayed initiative, with work remaining stalled since 2018. He highlighted that after the present government assumed office in April 2022, the project was accorded special attention, and the Ministry of Planning actively worked to resolve the outstanding issues and ensure its revival.

The minister stated that through the support and commitment of the Federal Government, the project was reinitiated with a revised cost of Rs. 9.98 billion, fully funded through the Public Sector Development Programme (PSDP). As a result of these dedicated efforts, the project, which was originally initiated in 2006, has now been physically completed, marking a significant milestone in the government’s commitment towards completion of stalled development initiatives.

Karachi Gateway Terminal Ltd, backed by Abu Dhabi Ports Group, has already completed a $60 million dredging project at Karachi Port and is expanding container and bulk-handling facilities, CEO Khurram Aziz Khan told Reuters in an interview.

“We are targeting another $75 million to $100 million” within five years, Khan said, adding that the next phase would focus on expanding the container terminal, enhancing yard capacity, larger ship and yard cranes, dedicated bulk export infrastructure, silos, warehouses and automated conveying.

New feeder service to serve KGTL, strengthens maritime connectivity between Pakistan, UAE

KGTL is also exploring investment in rail freight, including locomotives, rolling stock and storage hubs near agricultural areas, to link those areas to ports and help Pakistan export products such as corn and rice more competitively, he said.

“For transit as well, you need to provide a complete solution,” Khan said. “We are ready to invest in that as well, to bring our own rolling stock and locomotive for the freight trains business.”

Disruption into traffic

The Iran war created a new opportunity for Pakistan to act as a transshipment hub, as cargo was rerouted through Karachi for onward shipment to other destinations during the conflict, Khan said.

Minister marks Karachi Port dredging milestone

“Pakistan has never really handled transshipment volume,” he said. “This conflict has created this opportunity for Pakistan.”

The dredging project is expected to allow Karachi Port to handle bulk vessels of up to 120,000 metric tons, from about 60,000 tons previously, once Karachi Port Trust issues revised handling parameters expected within days, Khan said.

KGTL is upgrading its bulk terminal to cut handling time for a 60,000-ton vessel to about 2.5 to 3 days from 12 to 15 days, while building silos with annual capacity of 8.5 million tons for clean bulk cargo to secure national food security, bulk-export warehouses and systems for fertilizer imports.

But sustaining the gains will depend on better road and rail links, Khan said.

Notably, the salaried group that had been at the receiving end of higher taxation for a number of years saw some relief. However, the income tax threshold of Rs50,000 per month remained unchanged.

The incumbent government’s third federal budget carries a total outlay of around Rs18.77 trillion ($67 billion), reflecting a moderate increase from Rs17.6 trillion in the previous year’s budget, as policymakers attempt to maintain macroeconomic stability while navigating a challenging external environment marred by the Middle East crisis.

Interestingly, inflation target has been set slightly higher at 8.2%, largely attributed to the ongoing Middle East war that has rattled energy markets.

Meanwhile, as per the budget documents, Rs8,054 billion has been earmarked for interest payments in FY27. While Rs17,495 billion has been allocated for the government’s current expenditure in FY27.

According to budget estimates, the government targets GDP growth of 4% in FY27, compared to an estimated 3.7% in the outgoing fiscal year. Sector-wise, agriculture, industrial and services are expected to post growth of 3.6%, 4.5% and 4.2%, respectively, in FY27.

The budget deficit is projected to be 3.6% of the GDP, and a primary surplus of 2%  of GDP.

The budget projects a federal deficit of Rs7.02 trillion.

In his opening statement, the finance minister lauded the role of Pakistan’s armed forces, saying that the defence sector has emerged as a source of earning valuable foreign exchange.

He said the strategic defence agreement between Pakistan and Saudi Arabia is a moment of pride. “Pakistan will always steadfastly stand alongside KSA,” said Aurangzeb.

FBR tax target raised

The FBR has a tax collection target of approximately Rs15.26 trillion for FY27, representing an increase of over 8% compared to Rs14.13 trillion in the outgoing fiscal year.

An amount of Rs8,848 billion has been allocated for provinces from federal revenue.

Meanwhile, non-tax revenues are projected to exceed Rs5.34 trillion in FY27, supported by profits from the State Bank of Pakistan, petroleum levy collections, and proceeds from state-owned enterprises.

The government expects enhanced documentation, increased use of digital invoicing systems, and tighter monitoring of retail and wholesale sectors to contribute significantly towards achieving the target.

Minimum wage up 10%

Aurangzeb admitted inflation has increased the difficulties faced by salaried individuals.

“Recognising these challenges, the government is proposing a 7% increase in the salaries of public sector employees,” he said.

Moreover, a 7% increase in pensions for retired employees is also being proposed. Likewise, it is proposed the minimum monthly wage be increased by 10%.

Relief for the salaried class

The government announced some tax relief for salaried individuals, particularly those in middle- and high-income brackets, amid concerns over the high tax burden on documented income earners.

Under the new measures, the tax rate for individuals earning between Rs2.2 million and Rs3.2 million annually falls from 23% to 20%, while those in the Rs3.2 million to Rs4.1 million bracket receive a reduction from 30% to 25%.

For high-income individuals, earning between Rs4.1 million and Rs5.6 million will now pay 29% income tax, as compared to 35% last year. Similarly, individuals earning between Rs5.6 million and Rs70 million annually will now pay 32% in taxes, as compared to 35%.

Moreover, the government has abolished the 9% surcharge on high-income individuals. “These measures will reduce the burden on the salaried class,” said Aurangzeb.

The government has proposed the removal of the first six super tax slabs. Furthermore, income exceeding Rs500mn will now be subject to a super tax rate of 8%, compared to the previous rate of 10%.

Relief for the construction sector

To support construction activity, the government has proposed reducing withholding tax rates on property transactions. For filers, the tax on property purchases has been reduced from 2.5% to 1.5%, said Aurangzeb, while the tax on property sales has been reduced from 5.5% to 2.75%.

“We believe that construction activity will boost from this measure,” said Aurangzeb.

Moreover, the government has abolished the Capital Value Tax (CVT) on the holding of foreign assets.

PSDP

The government allocated around Rs1 trillion under the Public Sector Development Programme (PSDP), with priority areas including water infrastructure, transport connectivity, energy transmission projects, digital transformation, and climate resilience initiatives.

Defence spending rises

In light of evolving regional security dynamics and heightened geopolitical tensions, defence spending registered another increase.

“Defence spending has been increased considerably to make the country invincible due to the uncertainty in the region,” Aurangzeb said.

The government allocated more than Rs3 trillion for defence in FY27, compared to Rs2.56 trillion in the previous fiscal year, reflecting a continued focus on military preparedness amid an increasingly uncertain regional environment.

Defence as a percentage of GDP stands at 2.1% in FY27E compared to the FY26 revised estimate of 2.03% of GDP.

The government has allocated Rs1,169 billion for pension expenses in FY27.

BISP allocation increased

The government raises the allocation for the Benazir Income Support Programme (BISP) to around Rs838 billion for FY27, up 17% as compared to last year, reflecting efforts to shield vulnerable segments of society from inflationary pressures.

The government has allocated Rs365 billion for the transport sector, including Rs100 billion for the N-25 expressway.

The government has earmarked Rs116.2 billion for the power sector.

Talking about climate change, the finance minister noted that last year’s floods dented Pakistan’s economy with losses to the tune of Rs822 billion. The government has allocated Rs103.1 billion for 43 hydro projects, including Rs14 billion for Diamer Bhasha and Rs10 billion for the K-IV project in Karachi.

Education and health

The government has earmarked Rs25.1 billion for the health sector under the Annual Development Programme 2026-27 (ADP), including tertiary healthcare and critical care. Meanwhile, under the ADP, Rs46 billion has been allocated for higher education and research, which is higher than the Rs34.9 billion allocated last year.

Exemption for the IT sector

The government has announced to extend the income tax exemption for the IT sector until June 2029.

Meanwhile, the government has decided to lower the tax collection on export proceeds from the existing 2% to 1.25%.

Taxes on contraceptives eliminated

In a bid to control population, which has crossed the 250 million mark, the government has decided to abolish taxes on contraceptives, announced Aurangzeb.

It has also eliminated the Federal Excise Duty (FED) on international business-class travel. “This measure will help in attracting foreign investment,” said Aurangzeb.

FED imposed on POL solvents

The government, in a bid to curb adulteration, has imposed a Federal Excise Duty (FED) of Rs80 per litre on petroleum-based solvents, particularly petroleum naphtha, which are primarily used in paints and thinners.

“These petroleum-based solvents are widely used for the illegal adulteration of petrol. The objective of this measure is not only to discourage such unlawful activities but also to deter those who harm the national economy by producing adulterated fuel at a lower cost and selling it in the market,” said Aurangzeb.

FEDs on SUVs

The government has imposed Federal Excise Duty on imported SUVs with engine capacities exceeding 2,000cc and up to 3,000cc. It has also proposed to increase the duty on vehicles above 3,000cc.

The tax will be imposed on luxury EVs worth over Rs20 million.

Aurangzeb said through telecom digital wallets, the government is easing public investment in government schemes. “In a week or two, we are inaugurating a project in this regard,” he said.

He said tax compliance and enforcement would ensure an increase in tax revenue collection instead of an increase in taxes.

The finance minister said that the government has provided the enablers “towards that journey from stabilisation to sustainable growth”.

He said the government that achieving stability is “is just the start of the journey”, expressing hope that the announced measures will put Pakistan towards a path of sustainable growth.

The government had earlier indicated that the announcement would be made on June 10 after revising the schedule from its initial plan.

The budget comes at a time when Pakistan remains under a multi-billion-dollar IMF programme, requiring the government to sustain fiscal discipline, broaden the tax base, reduce untargeted subsidies, and improve revenue collection.

At the same time, escalating tensions between the United States and Iran continue to add uncertainty to global energy markets, raising concerns over oil prices and import costs for Pakistan, a major energy-importing nation.

The government says it is closely monitoring developments in the Middle East amid fears that any prolonged disruption in regional trade routes could adversely impact Pakistan’s external account and inflation outlook.

Pakistan’s financial markets had also anticipated a friendlier, growth-oriented budget, talks suggested, with the KSE-100 ending the session up by nearly 2,700 points. Additionally, with the economy now having stabilised according to government officials, many also believed Islamabad will look towards faster GDP growth in the coming fiscal year.

On Thursday, the government unveiled the Pakistan Economic Survey (PES) for FY2025-26, according to which GDP growth was recorded at 3.7% in the outgoing fiscal year.

The growth was higher than the previous year’s figure of 3.18% but well short of its target of 4.2% announced in last year’s budget.

“The improvement owes to effective macroeconomic management, better fiscal account, growth in the large-scale manufacturing (LSM) sector, resilience of the agriculture sector to floods of 2025, exchange rate stability and reforms under the IMF Extended Fund Facility (EFF) Programme,” the survey stated.

The envoy shared that Pakistan and Russia are working on the initiative of creating the Pakistan Stream gas pipeline.

“The North-South gas pipeline is a very important initiative, and we will definitely return to it at some point,” said Tirmizi, reported TASS.

“Once the economic cooperation mechanism begins to gain new momentum, the North-South transport pipeline in Pakistan, or Pakistan Stream, will become a landmark agreement between the two countries. It is currently being developed,“ he said, adding that negotiations with the Russian side are ongoing.

The energy crisis associated with the closure of the Strait of Hormuz “has demonstrated that different ways to transport energy resources should exist, not only for Pakistan, but globally,” the diplomat stressed.

Therefore, “Pakistan is in contact with the Russian side, and we expect oil and gas supplies from Russia,” he noted.

SOCAR said a framework agreement signed in 2025 between SOCAR Trading and Pakistan LNG allows the Pakistani buyer to purchase LNG cargoes directly under an accelerated procedure.

Strait of Hormuz closure: Pakistan faces LNG crunch as three cargoes stuck in Persian Gulf

“SOCAR is ready to provide LNG to Pakistan as soon as PLL submits a corresponding request,” the company said in response to Reuters questions.

SOCAR did not say whether such a request had already been made, when a first delivery could take place, or whose LNG would be supplied under the agreement.

Pakistan ramps up furnace oil use, delays nuclear maintenance amid LNG shortages

Pakistan, which relies heavily on gas for its energy needs, remains vulnerable to declining domestic production and swings in global LNG prices amid the supply disruptions related to the war with Iran.

The supply crunch comes as Qatar’s force majeure stemming from the Iran war have disrupted LNG imports, forcing countries such as Pakistan to seek alternative fuels or expensive spot cargoes. Areas throughout Pakistan experienced load-shedding on Wednesday.

Also read: Govt announces 2.25-hour loadshedding to ‘avert electricity price hike’

The country is facing a shortfall of around 3,400 megawatts due to reduced hydropower output, as rainfall and lower irrigation demand have limited water releases from reservoirs, Awais Leghari, power minister told a press conference.

There has also been a sharp drop in LNG-based generation, prompting load management of up to 6–7 hours in some areas, Leghari added.

Pakistan’s LNG-fired plants, with about 6,000 MW capacity, are producing only around 500 MW due to gas shortages, while hydropower output has fallen to about 1,600 MW, roughly half of last April’s level, he said.

To plug the gap, the country is arranging additional fuel supplies and has delayed nuclear plant maintenance to sustain generation, Leghari said.

Authorities are also running costlier furnace oil plants and seeking LNG supplies via government-to-government deals, including with Azerbaijan’s SOCAR, Leghari said.

‘Trying to avoid steep premiums’

Petroleum Minister Ali Pervaiz Malik said on Wednesday Pakistan may tap spot LNG markets but will prioritise such deals to avoid steep premiums, with prices at $20–$30 per mmBtu amid the conflict.

Pakistan typically imports 8–10 LNG cargoes a month under long-term contracts, but had, in recent years, faced a supply glut and cancelled shipments as domestic generation and solar uptake reduced demand.

Also read: Pakistan weighs spot LNG

Pakistan had minimal reliance on furnace oil in April last year due to its high cost, instead generating about 3,000 MW from LNG and 3,200 MW from hydropower.

Demand has also fluctuated sharply, rising from about 9,000 MW earlier in April to 20,000 MW within days as temperatures climb.

Rooftop solar growth — estimated at 12–14 GW and possibly up to 18 GW — has cut daytime grid demand, shifting shortages to evening peaks when solar generation falls and LNG-fired plants are typically needed.

Despite the shortages, the minister said diversification into coal, renewables and nuclear power had helped cushion the impact of the crisis.

The repayment comes as Pakistan targets foreign exchange reserves above $18 billion by June under a $7 billion International Monetary Fund programme, which requires bilateral deposits to be rolled over.

Pakistan’s central bank reserves stand at about $16.4 billion, with the UAE loan — around 18% of holdings — adding pressure on an economy still recovering as fuel costs rise and shortages linked to the Iran war fuel inflation and weigh on growth.

The loan had been rolled over since 2018, including a $3 billion facility at around 6% annual interest, but was shifted from annual to monthly extensions earlier this year before Islamabad decided to repay it in full, with clearance expected by April 23, one of the officials said.

Pakistan’s economy grows 3.89 pct in Q2 FY26, industry leads expansion

Another $450 million UAE loan has remained overdue for years, the official added. This amount is part of the total $3.5 billion being repaid, he said.

Reserves depletion to risk IMF program breach

Pakistan’s foreign ministry said on Saturday, without giving details that the central bank would begin repayments, and rejected speculation that the move was driven by geopolitical differences over the Middle East crisis.

Pakistan is a staunch ally of Saudi Arabia, while Abu Dhabi and Riyadh’s relationship has deteriorated in recent months due to the conflict in Yemen and lost oil revenue from the closure of the Strait of Hormuz.

Pakistan, IMF reach staff-level agreement for $1.21bn disbursement

A $1.3 billion Eurobond maturing before the end of this fiscal year in June adds to pressure on the country’s external position, with total obligations nearing $4.8 billion.

The IMF, Pakistan’s finance ministry and central bank did not respond to requests for comment.

The UAE deposits are part of support from friendly countries, including China and Saudi Arabia, which Pakistan had assured the IMF would be rolled over during the programme, though it is unclear if Islamabad will replace the funds.

If not replenished, the central bank reserves will fall below the level agreed with the IMF, which will be a breach of the program.

The repayments represent a significant near-term drain on reserves and could weigh on the rupee, said Waqas Ghani, head of research at JS Global Capital, adding that timely support from friendly countries would be key to stabilising reserves and restoring market confidence.

Analysts say Pakistan remains highly vulnerable to energy shocks due to structural inefficiencies and a heavy reliance on imported fuels.

Ali Khizar, Director Research at Business Recorder, noted that Pakistan’s energy-to-GDP efficiency is significantly lower than that of regional peers, including Bangladesh and India, making the economy more exposed to price spikes.

He maintained that Pakistan’s key industries, such as textiles, cement and fertilisers, are energy-intensive, which amplifies the impact of higher fuel costs.

“Therefore, energy price shocks in Pakistan are higher as we are energy inefficient.”

Khizar pointed out that energy prices have already surged by around 60% compared to last year, warning that at current levels, Pakistan’s oil import bill could rise by nearly 50% this fiscal year.

He estimated that every $10 per barrel increase in oil prices adds roughly $1.5 billion to the country’s annual oil bill, putting immediate pressure on the current account.

While Pakistan has benefited from reduced reliance on imported LNG due to improved domestic gas production, Khizar cautioned that “Pakistan still requires 3-4 cargoes monthly”.

“If we don’t get these cargoes, our growth will be impacted,” he said.

On the external inflows side, risks are also building. Khizar warned that a prolonged conflict in the Middle East could reduce remittances by 15–20%, as economic uncertainty affects overseas Pakistani workers.

Experts warn that if the conflict affects expatriate employment, particularly in Saudi Arabia and the UAE, which account for a large share of inflows, remittances would be impacted.

According to State Bank of Pakistan (SBP) data, workers’ remittances totalled $3.3 billion in February 2026. Cumulatively, remittances reached $26.5 billion during the July–February fiscal year 2026.

Highlighting the policy trade-offs, Khizar said Pakistan’s reliance on the International Monetary Fund programme remains critical, adding that meeting its conditions may require currency depreciation and higher interest rates to stabilise the external account.

Echoing similar concerns, Saad Hanif, head of research at Ismail Iqbal Securities, said petroleum imports account for roughly one-fourth of Pakistan’s total import bill, highlighting the economy’s sensitivity to oil price movements.

“With oil already above $100 per barrel, the pressure on the current account has effectively materialised,” Hanif said, noting that while prices around $60 per barrel are manageable, the current surge significantly weakens the external balance.

“Based on established sensitivities, every $10 per barrel increase in oil prices widens Pakistan’s current account deficit by approximately $1.8–2 billion annually, implying a cumulative impact of nearly $5-6 billion at current levels.

“This significantly elevates Pakistan’s external financing requirement, particularly if higher prices persist alongside elevated freight and supply chain disruptions stemming from the conflict.”

Pakistan recorded a current account surplus of $427 million in February 2026.

However, on a cumulative basis, the country posted a current account deficit of $700 million during Jul-Feb FY26.

Hanif also highlighted that remittances may not provide the same cushion this time.

“Given that a large share of Pakistan’s workforce is based in the Middle East, a prolonged conflict could disrupt labour markets, delay payments, or slow new hiring, thereby tempering remittance inflows over time.

“This reduces the effectiveness of remittances as a buffer compared to past oil price cycles,” he said.

To a query, Hanif stated that although IMF inflows and support from other multilaterals can provide short-term liquidity and help stabilise reserves, “they primarily address financing needs rather than offset the structural imbalance”.

Meanwhile, Fitch Ratings has flagged broader regional risks, noting that Asia-Pacific economies, including Pakistan, face heightened downside pressures from a prolonged conflict.

“Large net fossil-fuel importers, such as India, South Korea, Pakistan, the Philippines, the Maldives and Thailand, would face the sharpest deterioration in external balances and real incomes if energy prices rise and shipping disruptions persist,” the rating agency noted in its latest report.

As per the rating agency, nearly 90% of Pakistan’s oil imports come from the Middle East, while the country has less than 30 days of oil reserve coverage, both strategic and commercial.

With geopolitical tensions showing little sign of easing, economists warn that Pakistan’s current account outlook could deteriorate rapidly.

“As such, in a scenario of sustained geopolitical tensions and elevated oil prices, Pakistan’s current account is likely to remain under pressure, with both key supports, remittances and external financing facing a more uncertain outlook than usual,” said Hanif.

Here are some economies to watch.

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THE G7

Look first to Europe. A fresh energy shock rekindles painful memories of Russia’s invasion of Ukraine four years ago that brought the region’s import dependence sharply into focus.

Inflation is set to jump again and traders are betting the European Central Bank and the Bank of England may have to raise interest rates this year.

Data on Tuesday showed business activity has already taken a hit from the conflict, signalling slowing economic growth.

Strait of Hormuz crisis: Global economy under ‘major threat’: IEA chief

GERMANY - Its industry-heavy economy has more to lose from costlier energy and any global downturn that would hit its exporters. But for now, German business activity is holding up relatively well and the manufacturing sector is continuing to expand after contracting for nearly four years.

A massive stimulus programme Germany announced last year should help cushion some of the impact.

Long war may undercut global economy, analysts warn

ITALY - Also home to a big manufacturing sector. Moreover, oil and gas have among the highest shares in its primary energy consumption in Europe.

BRITAIN - In its electricity production it relies more on gas-fired power than its European peers. Gas prices almost always set its electricity prices - and they are rising faster than oil prices since the start of the war.

An energy price cap will dampen the initial inflation impact. Interest rate hikes would deepen the pain for borrowers, however, as Britain already has the highest borrowing costs in the G7 at a time of rising unemployment.

Budget strains and pressure in the bond market limit the government’s options for helping businesses and households.

JAPAN - Also firmly in the firing line, sourcing around 95% of its oil from the Middle East and nearly 90% of it travelling through the Hormuz Strait.

That comes on top of inflationary pressures it is already experiencing from a weak yen, which affects food and daily necessities prices given Japan’s heavy reliance on imported raw materials.

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EMERGING ECONOMY HEAVYWEIGHTS

The Gulf region itself is inevitably taking a direct economic hit, with some forecasters already predicting its economy will now shrink this year, reversing pre-war expectations for solid growth.

The jump in oil and gas prices is no help if the effective closure of the Strait of Hormuz means countries - especially Kuwait, Qatar and Bahrain - cannot get their hydrocarbons onto the international markets.

The conflict could also affect remittances - the money expat workers send back home to their families and which each year pumps tens of billions of dollars into the local economies.

Petroleum products: Current prices will be maintained despite global hike: PM

PAKISTAN was teetering on the brink of crisis two years ago and has ramped up its petrol prices and closed its schools for two weeks too. Government departments are having their fuel allowances halved, are now banned from buying new air conditioners and furniture, and have been ordered to take a chunk of their vehicles off the road.

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INDIA - Another exposed heavyweight. It imports about 90% of its crude oil and nearly half of its liquefied petroleum gas, and roughly half of that oil and an even larger share of its LPG has to come through the Strait of Hormuz.

Economists are already trimming the country’s growth forecasts and the rupee has swooned to a record low. In restaurants and kitchens across India, hot food and drinks - even samosas, dosa and chai tea - are disappearing from the menu as the surge in gas prices leads to informal rationing.

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TURKEY - Sharing a border with Iran, it is bracing for a potential influx of refugees and more geopolitical uncertainty. The main economic impact meanwhile has been on the central bank.

It is already having deja vu of inflation crises past. It has been forced to halt its interest rate-cutting cycle for the second time in a year and sold as much as $23 billion in precious reserves to bolster its currency.

THE FRAGILE FEW

There are also a handful of countries that look particularly vulnerable having recently been through - or had close shaves with - full-blown economic crises.

SRI LANKA has just made every Wednesday a public holiday for state-sector workers in a bid to cap energy costs. Schools, universities and public institutions are being shut, non-essential public transport suspended and drivers must now register for a National Fuel Pass restricting fuel purchases.

EGYPT, on top of the surging cost of fuel and food staples, faces the prospect of a sharp drop in Suez Canal and tourism revenues, the latter of which brought almost $20 billion into the economy last year. The cost of paying back its debt, much of which is in U.S. dollars, has been made more arduous too by a near 9% slump in its own currency since the war began.

The request comes as war in the Middle East has disrupted shipping through the Strait of Hormuz, a critical global chokepoint through which a large share of the world’s oil and most of Pakistan’s fuel imports pass, raising concerns about supply security for import-dependent economies.

“He further highlighted that Saudi Arabian sources had assured security of supplies through the Port of Yanbu on the Red Sea, which can help meet energy requirements,” read the release, adding that one vessel has been arranged to sail to Yanbu to lift crude for Pakistan.

Riyadh reaffirmed it would support Pakistan in meeting its emergency energy needs, it added.

Pakistan, KSA to deepen ties in energy and minerals

Petroleum Minister Ali Pervaiz Malik raised the issue in a meeting with Saudi Arabia’s ambassador to Pakistan, Nawaf bin Said Al-Malki, according to a ministry statement.

The minister said most of Pakistan’s energy imports transit through the Strait of Hormuz and the government was monitoring the situation closely to ensure the continuity of supplies.

Saudi Arabia has also been seeking to divert some crude exports to the Red Sea port of Yanbu to bypass Hormuz as shipping through the strait slows due to the conflict, according to sources familiar with the matter.

He said this while talking to World Bank Group (WBG) President Ajay Banga who called on him at the PM House.

The prime minister welcomed Ajay Banga at his first official visit as the World Bank Group president.

PM Shehbaz appreciated the World Bank Group for its long-standing partnership with Pakistan and its commitment to supporting the development priorities of the country especially through the 10-year World Bank Group Country Partnership Framework (CPF).

The premier also appreciated Banga’s leadership in transforming the World Bank Group into more impactful development partner.

He stated that the government was vigorously working on economic reform agenda with multi-pronged comprehensive structural home grown programme aimed at sustainable economic stability.

The prime minister appreciated the support of the World Bank Group in resilient infrastructure, agribusiness, digital development, energy, human capital, fiscal reforms, and increasing productive private investment for job creation and growth.

PM Shehbaz and Banga reiterated the need to fast-track implementation and ensure strong oversight to deliver impact at speed and scale on CPF-aligned priorities.

These measures would duly assist the prime minister’s initiative to address and resolve Implementation Bottlenecks in development projects.

The prime minister expressed the government’s commitment to structural reforms that would unlock job-rich growth and further strengthen investors’ confidence.

Banga expressed his gratitude to the prime minister for his reception and hospitality in Pakistan. He commended the government of Pakistan’s ongoing reform efforts and reaffirmed his commitment to deepening cooperation through a One World Bank Group approach.

He added that greater leverage of private resources, in addition to strong coordination with development partners, was necessary to meet the ambition of the government’s reform agenda.

President Banga meets CM Afridi

Meanwhile, Khyber Pakhtunkhwa Chief Minister Mohammad Sohail Afridi also met with WBG President Banga in Islamabad today to discuss expanding cooperation in the sectors of health, education, minerals, energy, and climate resilience.

The meeting was also attended by KP’s Adviser on Finance Muzammil Aslam, Chief Secretary Shahab Ali Shah, and other senior officials.

During the discussion, Chief Minister Afridi stated that the Khyber Pakhtunkhwa government highly values the World Bank’s support, noting that health and education remain top provincial priorities. He highlighted that substantial investments are being made in these sectors, particularly in strengthening the primary healthcare system.

The Chief Minister announced the launch of the “Ehsaas Maa” programme, under which the government will take full responsibility for the care of mothers and children from pregnancy to birth.

Notably, he shared that an additional three months of support will be provided in the event of a girl’s birth. He also reaffirmed that the province is providing universal health coverage to its entire population.

Addressing environmental and economic challenges, Afridi mentioned that Khyber Pakhtunkhwa has suffered significant damage from natural disasters, prompting increased investment in climate resilience.

In line with Imran Khan’s vision, he emphasised that the interests of local populations are being prioritised within the mineral sector. Furthermore, a comprehensive strategy is being implemented to make the province food self-sufficient, including projects to bring barren lands in the southern districts under cultivation.

Addressing a seminar organised by Nutshell Group, titled Resetting Pakistan’s Economic Direction, the minister said Pakistan’s previous international issuances were in US dollars, euros, or Islamic sukuk.

“Issuing in RMB, which is the world’s second-largest and second-deepest capital market, and swapping it into dollars yields a 2.5% differential.”

“Every single bit counts,” he said.

The minister noted that the country’s debt-to-GDP ratio has reduced to 70% from 75%, and average maturity has been extended to over four years, reducing refinancing cost and urgency.

“Last year, we saved around Rs850 billion in terms of debt servicing. If all goes well, this year we expect to remain below our budget, almost by a similar amount. This is not only because the policy rate has come down,” he said.

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Aurangzeb said that the government has handed over 24 state-owned enterprises (SOEs) to the Privatisation Commission. Citing a recent report, Aurangzeb shared that the government was losing nearly Rs1 trillion annually.

“That is a huge drain, and these resources can be put to far better use.”

He said that the decision to shut down entities such as PWD, Utility Stores Corporation, and PASSCO was taken because of heavy subsidies and corruption embedded within those subsidies. “This was the real cost to the exchequer, which is why these reforms are moving forward,” he said.

On structural reforms, Aurangzeb termed tariff reforms a major step, including reductions in regulatory duties, customs duties and additional customs duties, aimed at lowering the cost of intermediate and raw materials.

“This is the first time in 78 years that such reforms have been undertaken. From our perspective, this can be Pakistan’s East Asia moment,” he said.

He added that Pakistani industries have long enjoyed protection and, as a result, lacked competitiveness and export orientation.

Acknowledges firms’ exit

The finance minister said 20 new foreign investors have entered Pakistan over the past 18 months, including Google, Aramco, Gunvor, Turkish Petroleum, BYD, Chery Auto, Abu Dhabi Ports, Nova Mineral, Mashreq Digital and Samsung.

Govt’s economic team highlights reform progress as Pakistan enters stabilisation phase

“Yes, some firms have also exited,” he acknowledged, citing high taxation, energy and financing costs. “But firms such as Nestlé and Unilever, which adapted through local sourcing, are now enjoying strong margins and exporting. Others need to rethink their models.”

On capital markets, Aurangzeb said the Pakistan Stock Exchange has expanded, with 135,000 new investors added in 18 months.

“Some 280 new companies have been registered, nine IPOs took place last fiscal year, and 16 IPOs are in the pipeline,” he said.

Turning to the new economy, Aurangzeb said Pakistan has around 40 million crypto users, with trading volumes worth billions of dollars. “This activity must be brought into a regulated environment,” he said.

He added that Pakistan has the third-largest freelancer population globally, noting that with upskilling in blockchain technologies, freelancers earning $12–14 per hour could earn $50 to $250 per hour.

On governance and inclusion, the minister said that by June this year, all government payments will be routed through digital channels.

He concluded by warning that if Pakistan aims to become a $3 trillion economy by 2047, its population growth rate of 2.55% must be reduced. “Otherwise, growth alone will not get us there,” he said.

Presiding over a forum titled ‘Strengthening Pakistan’s Blue Economy: High-Level Roundtable on Maritime Growth’, the planning minister on Friday said Pakistan faces significant opportunities to enhance foreign exchange earnings and support sustainable economic growth by leveraging its maritime resources.

Representatives from the Gwadar Port Authority, Ministry of Maritime Affairs, and other relevant stakeholders were also present on this occasion.

READ MORE: Shrimp estates: Punjab takes step towards promoting aquaculture, blue economy

The session included a detailed briefing by Member Infrastructure Dr Waqas Anwar on the ministry’s preparatory work and the proposed roadmap for the development of maritime and blue economy sectors.

In his remarks, Prof Iqbal emphasised that Pakistan’s economic future is closely linked to its ability to expand exports and generate foreign exchange. The blue economy represents a strategic opportunity to achieve these objectives while promoting sustainable development, he maintained.

According to the briefing given to the forum, achieving Pakistan’s vision of a $1 trillion economy by 2035 will require accelerated export growth and effective utilisation of untapped sectors.

The blue economy offers substantial potential in fisheries, aquaculture, ports, shipbuilding, and maritime tourism to generate foreign exchange, it said, adding that current gaps in value addition, cold chain infrastructure, processing, branding, and marketing limit sector returns.

READ MORE: Blue economy a ‘game changer’ with $100bn potential for Pakistan: Aurangzeb

The planning minister highlighted that foundational work has been completed on port development (Karachi, Port Qasim, Gwadar), shipbuilding, and the revitalisation of Gadani Shipyard.

Unlocking the full potential of maritime resources requires a holistic, integrated approach and coordinated action across stakeholders.

According to the survey findings, 51 percent of Pakistanis are optimistic and 20 percent others pessimistic about the New Year, indicating a net positive outlook for 2026. Pakistani optimism is significantly higher than India’s 39 percent and also surpasses the global average of 24 percent.

READ MORE: Pakistan economy to maintain ‘positive momentum’, LSM to recover, says Finance ministry

Peace expectations are also significantly higher here as 52 percent of Pakistanis believe that world peace will improve. In India, this figure is only 26 percent.

This represents one of the highest levels of optimism in Pakistan since 1994, Gallup’s press release for the End of Year Survey said, adding that the optimism level surpassed only during a few peak periods, notably the late 1990s and the mid-2010s.

Across the three measures, overall hope, economic optimism, and hope for peace, Pakistan ranks ahead of India on two and exceeds the global average on all three, it said.

“The End of Year Survey conducted by the Gallup International Association covered 60 countries, including Pakistan, with a total sample size of 59,636 respondents.

“This annual survey is a long-standing tradition of the association, and represents the largest global study of its kind carried out by independent polling organisations. In Pakistan, the survey has been implemented by Gallup Pakistan since 1994, ensuring continuity and comparability of public opinion trends over time,” the survey report said.

READ MORE: PM launches Pakistan’s Economic Governance Reforms

Chairing a high-level meeting of the private sector working group on port development, the prime minister emphasised that Pakistan’s maritime gateways are the backbone of the economy. He instructed that various port charges be further reduced to make Pakistani exports more competitive in the global market.

The prime minister directed that rail connectivity from ports must be upgraded to improve the inland transportation of goods. Dredging and expansion work at all ports—particularly in Karachi—must be accelerated to accommodate larger vessels, he said, adding that tenders for these projects have already been issued.

To prevent delays, initial cargo testing laboratories should be established within the port premises, and redundant lab tests must be abolished, he ordered.

‘Climate resilience’: govt cuts export cargo handling charges by 50% at Karachi Port

Addressing the issue of long-staying abandoned cargo, PM Shehbaz ordered a transparent auctioning system. He directed the establishment of dedicated yards for such cargo and suggested hiring world-renowned firms to manage the process. A new e-bidding system will soon be operational, allowing participants from across the country to bid for abandoned cargo remotely.

The chairman of the working group, Ziad Bashir, presented solid recommendations for port reforms and praised the government’s recent moves. He noted that the transparent privatisation of the Pakistan International Airlines (PIA) has significantly restored the confidence of the business community.

The meeting was briefed that the national ports master plan is moving ahead rapidly and that the port community system has already become operational. Furthermore, as a major relief measure, bulk cargo fees at Port Qasim were recently slashed by over 50%.

The session was attended by federal ministers Ahsan Iqbal, Ahad Khan Cheema, Musadik Malik, and other senior government officials.

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Type 1121 white basmati rice is sought.

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The deadline for submission of price offers in the tender is December 30.

“Remittances are free foreign exchange, straight into households, with no debt attached. Surely that must be good? For the families receiving them, absolutely. But for the broader macroeconomy, the story is more complicated - and more interesting,” wrote Atif on his website atifmian.com on Friday.

“If remittances are not managed properly, they can become a restraint on growth. In fact, the evidence suggests that this is exactly what has happened in Pakistan.”

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.

According to the latest data, provided by the SBP, remittance inflows in Pakistan stood at $16.1 billion during the first five months of the ongoing fiscal year, up from $14.8 billion in 5MFY25, a jump of 9.3%.

Meanwhile, Atif, currently a professor of Economics at Princeton University, noted that remittance inflows to Pakistan, sent by nearly 10 million Pakistanis living abroad, are now about $38 billion a year, roughly 10% of GDP.

“They are now about twice as large as what you’d expect for a country at this income level,” he said.

Such figures do have macroeconomic effects, says Atif.

What is Atif Mian 5/50 framework to transform Pakistan’s economy?

“First, they raise consumption and spending power faster than the economy’s own productive capacity. Second, the steady inflow of dollars tends to appreciate the rupee in real terms, which disproportionately hurts the more productive, export-oriented tradable sector. Together, these forces make the country more expensive than its productivity justifies — the classic pattern economists call Dutch disease.”

This trend has become visible in Pakistan as well, as the country’s export sector has steadily weakened during the period, while remittances have become more dominant, the economist said.

“The exchange rate has been overvalued for long periods. Pakistan’s investment-to-GDP ratio is strikingly low—implying an unusually high consumption-to-GDP ratio—compared with other countries at a similar income level,” highlighted Atif.

However, this trend can be reversed by adopting the right economic policies, says Atif.

“That requires two key steps. First, when remittances surge, the central bank shouldn’t just let them spill into consumption and an overvalued currency. It can lean against the wind by building foreign exchange reserves

“Second, the government needs a serious foreign direct investment strategy that channels capital into greenfield projects in tradable and other high-productivity, technology-intensive sectors. These inflows must be carefully regulated: short-term speculative portfolio flows, and investment into low-productivity non-tradable sectors like real estate, should be discouraged.”

Atif also questioned Pakistan’s elite rent-seeking behaviour, which keeps the exchange rate overvalued, allowing them to convert domestically generated rents into foreign assets on more favourable terms.

“The irony is stark here: the remittances of poor workers forced to leave home in search of a livelihood end up helping sustain the external purchasing power of the country’s most privileged groups,” he concluded.

All 12 analysts surveyed expect no cut in the policy meeting on Monday. A majority of them see inflation hovering at 6%–8% in the coming months before rising again toward the end of fiscal 2026 as base effects fade and food and transport prices stay volatile after flood-related supply disruptions.

Most respondents now believe the State Bank of Pakistan (SBP) will not begin easing until the closing months of FY26, which ends in June 2026, with some analysts pushing forecasts for the first cut into fiscal year 2027, beginning July 2026.

IMF warns against premature easing

The IMF, in a second review released on Thursday, said monetary policy needs to remain “appropriately tight and data-dependent” to keep expectations anchored and noted that the SBP had maintained positive real interest rates on a forward-looking basis.

It said the tight stance had been pivotal in reducing inflation and should be maintained to ensure price stability and support the rebuilding of external buffers.

Analysts said these risks, along with the SBP’s preference for maintaining positive real interest rates, would keep policymakers cautious.

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The SBP has held its policy rate at 11% since September, after cutting it by 1,100 basis points between June 2024 and May 2025 as inflation fell sharply from highs near 40% in 2023.

Price, external pressures edge up

Inflation has started to accelerate after months of decline, driven by food and transport costs and fading base effects.

Headline inflation eased to 6.1% in November from 6.2% in October but remained above the SBP’s 5–7% target.

The IMF expects inflation to temporarily accelerate to 8%–10% this fiscal year before stabilising.

While Pakistan’s macroeconomic backdrop has stabilised somewhat, analysts said the recovery remains sensitive to external pressures.

Premature rate cuts could pressure the rupee even with anticipated IMF inflows, including $1.2 billion disbursement this week to bolster reserves and support climate-resilience reforms.

Any demand-driven uptick, said Sana Tawfik, head of research at Arif Habib Ltd, “will have an adverse impact on the external front”.

The uptick in Pakistan’s fuel oil exports has added to supply in Asia, weighing further on prices in a market that is already well-supplied, traders and analysts said.

Fuel oil exports from Pakistan reached a fresh high this year, shipping data from Kpler and LSEG showed.

Exports so far this year have breached 1.4 million metric tons (about 8.9 million barrels), up over 16% from the full-year volume in 2024, the data from Kpler showed, with most of these exports ending up in Southeast Asia and the Middle East.

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LSEG data showed exports at 1.33 million tons so far in 2025, up from 1.11 million tons last year.

The cargoes were mostly high-sulphur fuel oil (HSFO) and added mainly to the marine fuel supply, while some volumes went to refineries as feedstock, market sources said.

“Pakistan primarily exports HSFO to Asia, which has been seeing an excess in supply post-summer season and has depressed cracks in the region,” said Valerie Panopio, vice president for oil commodity markets at Rystad Energy.

Pakistani refiners sold more fuel oil via tenders this year after the government raised taxes for domestic fuel oil consumption, while power generators gravitate towards alternatives such as coal and solar.

The leading Pakistan fuel oil exporter was Pak-Arab Refinery, according to traders, while other exporters included Cnergyico, Attock Refinery, National Refinery and Pakistan Refinery.

Cnergyico, which is the country’s largest oil refiner, has said it aims to boost exports.

The company exported about 247,000 tons of fuel oil in fiscal year 2024–25, its vice-chairman Usama Qureshi said.

Qureshi added that he expects at least 50% growth this fiscal year, supported by increased use of light-sweet crude that lifted its output of very low sulphur fuel oil.

The company has partnered up with global trading house Vitol to supply more low-sulphur marine fuel from Pakistan ports.

“The increase in fuel oil exports in the past years have helped ensure that refinery runs are not constrained by inventory limits, something that was an issue in the previous years,” said Xin Shuai Huang, oil market analyst at FGE.

Next year, the exports are likely to maintain or climb further, according to Pakistan industry sources.

“The trend in furnace oil exports is only going to increase going forward in 2026,” said Syed Nazir Abbas Zaidi, secretary general of Pakistan’s oil companies advisory council.

“Fuel oil is no longer viable in electricity generation, and no longer profitable to sell in the domestic market, following the last budget,” Zaidi said.

Pakistan turned from a net importer into a net exporter of fuel oil in 2023.

The Technical Assistance Report, Pakistan Governance and Corruption Diagnostic Assessment, released on the Finance Division website late Thursday night, singles out the sugar industry as a textbook example of how the intertwined relationship between economic elites and state regulators combines to capture public benefits at a deep cost to the overall public.

“Firms in the sugar sector benefited from favourable government policies, subsidies, and regulatory loopholes for decades, mainly due to the nexus between industry magnates and political leaders,“ it said.

“Sugar mill owners, many of whom hold government positions, have ensured highly ‘recommended’ prices for sugarcane and protective tariffs, keeping their operations profitable at the expense of competitiveness,” said the IMF.

The term elite capture is used to describe the process where powerful, wealthy, or politically connected groups manipulate public policy and resources for their own private gain, often at the expense of the general public. The result is that development and resources are ‘captured’ and disproportionately flow to the elite.

“They have also influenced export and pricing policies to their advantage. In 2018–19, a government decision allowed significant sugar exports, even subsidising them, which created domestic shortages and price spikes for consumers,” it noted.

Similar patterns of privilege are evident in real estate, where generous tax exemptions erode revenues, the IMF notes.

“Until recently, agricultural income has not been taxed, while real estate, manufacturing, and the energy sector continue to benefit from favourable taxation arrangements,” the report noted.

IMF said that the revenue loss from such tax expenditures is substantial, with the government itself estimating costs at 4.61% of GDP in FY 2023.

“This pattern of preferential treatment contributes significantly to Pakistan’s low tax-to-GDP ratio and fiscal challenges. The selective and arbitrary enforcement of laws and policies enables powerful forces to shape economic decisions and influence economic possibilities for both public and private parties,” it said.

The Fund noted that historically, Pakistan’s economic elite consolidated power through their control over land, a legacy shaped by colonial policies that favoured landowners.

“Following independence, the continuation of these policies further entrenched elite control over land and broader economic activity,” it said.

Citing a 2020 UNDP report, which estimated that the “elite privilege” amounted to $4.7 billion for the corporate sector alone.

The IMF cautions that without dismantling these privileges, Pakistan’s economic stabilisation efforts risk being repeatedly undone by vested interests that have long shaped the country’s political economy.

During the meeting, Ambassador Khan congratulated Kapur on assuming his new role.

In a post on social media platform X, Khan said the two sides “discussed ways and means of translating the resolve expressed at the leadership level of developing Pak-US ties into an economically entrenched strategic partnership, through sustained engagement in multiple domains of mutual interest.”

Meanwhile, Assistant Secretary Kapur, in a post on social media, described it as a pleasure to meet the Pakistani envoy, noting that the two “discussed ways to advance the US-Pakistan relationship and make our countries more prosperous and secure.”

The meeting comes as both nations explore opportunities for expanded collaboration in economic development and security cooperation.

Earlier this year, the US administration struck a deal with Pakistan in which Washington would work with Islamabad in developing the South Asian nation’s oil reserves.

Islamabad described the deal as a marker of a broader partnership with Washington. Finance Minister Muhammad Aurangzeb, who led the final round of talks, said there was a larger economic and strategic agreement.

“From our perspective, it was always going beyond the immediate trade imperative, and its whole purpose was, and is, that trade and investment have to go hand in hand,” Aurangzeb had said at the time.

Following the announcement, the US administration imposed a significantly lower 19% reciprocal tariff on a wide range of Pakistani goods.

The tariff was initially proposed at 29%.

He made this statement while delivering a virtual address on Tuesday at the inaugural session of the Pakistan International Maritime Expo & Conference (PIMEC), organised at the Expo Centre Karachi by the Pakistan Navy and the Ministry of Maritime Affairs.

Ahsan Iqbal opens PIMEC, calls for promoting blue economy

Aurangzeb observed that the maritime sector currently contributes only around 0.4 to 0.5% to the national GDP - approximately $1 billion - but holds vast potential for expansion.

The World Bank defines the blue economy as the sustainable use of ocean resources for economic growth, improved livelihoods and jobs, while preserving the health of ocean ecosystems.

He endorsed the Ministry of Maritime Affairs’ vision of developing this into a $100 billion blue economy by 2047, coinciding with Pakistan’s 100th anniversary and the broader national ambition of becoming a $3 trillion economy. He described this goal as “ambitious but very reachable”, supported by a clear and robust roadmap.

The minister underlined the importance of enhancing fisheries and aquaculture through value-added processing, modern cold-chain logistics and international-standard hygiene practices.

“Pakistan’s seafood exports, currently around $500 million, could feasibly increase to $2 billion within the next three to four years under the National Fisheries and Aquaculture Policy, which has been developed in strategic partnership with the Food and Agriculture Organization (FAO),” said Aurangzeb.

He assured that the government remains firmly committed to ensuring policy consistency and continuity to see such initiatives through their full cycle.

Aurangzeb further emphasised the modernisation and digitisation of port operations at Karachi, Port Qasim and Gwadar, aligning them with global best practices to strengthen regional trade connectivity. He also highlighted the potential of renewable energy projects, including tidal and offshore wind generation, and the need to explore innovative financing mechanisms such as blue bonds and blended financing to fund sustainable development and conservation initiatives.

In his remarks, Aurangzeb also highlighted the significant progress Pakistan has achieved in recent years toward restoring macroeconomic stability.

He noted that the exchange rate has remained stable, foreign exchange reserves have risen to cover more than two and a half months of imports, over $14 billion.

“Inflation has been a very good story, although we have seen it coming back up slightly because of the unfortunate floods that afflicted the country this year, but it remains in single digits,” said Aurangzeb.

He also pointed out that the policy rate has come down in line with improving inflation, while all three leading global rating agencies have upgraded Pakistan’s outlook to “stable” after nearly three years, reflecting international confidence in the direction of the country’s economic policies.

Government’s economic team unveils progress report on structural reforms, way forward

“After a hiatus of 2.5 years, we have three global rating agencies that are fully aligned not only in terms of upgrades but also outlook, which is stable for Pakistan’s economy,” he said.

Referring to Pakistan’s engagement with the International Monetary Fund (IMF), the minister said that the recently concluded staff-level agreement in Washington further strengthens global confidence in the government’s reform agenda and macroeconomic management.

“We find ourselves in a good spot at this point because there is a confluence of factors,” he said.

The minister said Pakistan should leverage its longstanding relationships with key partners, including China, the United States, and the Gulf countries, particularly Saudi Arabia and the UAE, to shift from government-to-government arrangements toward greater trade and investment flows.

Turning to the blue economy, Aurangzeb observed that the maritime sector currently contributes only around 0.4 to 0.5% to the national GDP - approximately $1 billion - but holds vast potential for expansion.

He endorsed the Ministry of Maritime Affairs’ vision of developing this into a $100 billion blue economy by 2047, coinciding with Pakistan’s 100th anniversary and the broader national ambition of becoming a $3 trillion economy. He described this goal as “ambitious but very reachable”, supported by a clear and robust roadmap.

The minister underlined the importance of enhancing fisheries and aquaculture through value-added processing, modern cold-chain logistics and international-standard hygiene practices.

“Pakistan’s seafood exports, currently around $500 million, could feasibly increase to $2 billion within the next three to four years under the National Fisheries and Aquaculture Policy, which has been developed in strategic partnership with the Food and Agriculture Organization (FAO),” said Aurangzeb.

He assured that the government remains firmly committed to ensuring policy consistency and continuity to see such initiatives through their full cycle.

Aurangzeb further emphasised the modernisation and digitisation of port operations at Karachi, Port Qasim and Gwadar, aligning them with global best practices to strengthen regional trade connectivity. He also highlighted the potential of renewable energy projects, including tidal and offshore wind generation, and the need to explore innovative financing mechanisms such as blue bonds and blended financing to fund sustainable development and conservation initiatives.

The growth is higher than the 2.68% estimated by the National Accounts Committee (NAC) during the previous meeting.

“The updated growth rates in agriculture, industry and services are 1.51%, 5.26% and 3% as compared to earlier growth rates of 0.56%, 4.77% and 2.91% respectively,” said NAC in its 114th meeting held today.

Pakistan’s GDP grows 2.4% in Jan-Mar: NAC

In agriculture, while important crops have slightly improved from -13.49% to -13.12%, other crops have witnessed significant improvement from 4.78% to +19.55% due to double-digit growth in the production of green fodder (16%), vegetables (12%), fruits (10%), and tobacco (25.7%).

Meanwhile, livestock has decreased from 4.72% to 2.94% because of an increase in fodder inputs. Further, updated growth rates in forestry and fishing are 2.66% and 1.40% respectively.

According to NAC, the updated growth in industry during FY2025 is 5.26% as compared to 4.77% estimated previously.

“The mining & quarrying industry has improved from -3.38% to -2.35% due to improvement in oil (3.5%), limestone (31.6%), marble (11.6%), and exploration cost (26.1%). Large-scale manufacturing, which is measured through Quantum Index of Manufacturing (QIM), has improved from -1.53% to -0.69%,” read the release.

Meanwhile, the services industry has increased from 2.91% to 3% in FY2025 with positive contributions from all the constituents.

“Wholesale and retail trade has improved to +0.46% from 0.14% because of improvements in agriculture, manufacturing, and imports. The transport and storage industry has improved to +2.43% from 2.20% due to upward revisions reported by NTRC, PIA, domestic airlines, CAA, foreign airlines, KPT and storage activities.

“While information & communication has slightly declined from 6.48% to +5.85%, finance & insurance has improved from 3.22% to +3.90% due to improvement in the insurance industry,” it added.

Size of economy

According to NAC, based on the latest figures of the national accounts aggregates for FY2025, the overall size of the economy stands 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/- i.e. $1,812, the NAC data showed.

Quarterly figures

The NAC approved revised quarterly GDP growth rates for Q1, Q2, & Q3 and fresh growth of Q4 during FY 2024-25. Overall GDP witnessed upward revisions in the first three quarters from 1.37% to 1.80% for Q1, from 1.53% to 1.94% for Q2, and from 2.40% to 2.79% for Q3.

“These changes are mainly due to upward revisions in annual benchmarks in agriculture, resulting in improved growth rates,” the committee said.

During Q4 of FY2025, the economy posted a growth of 5.66%. The growth in agriculture, industry and services stands at +0.18%, +19.95% and +3.72%, respectively.

Expressing his views on the social media platform X, Asad, the former president of the Institute of Chartered Accountants Pakistan (ICAP), said: “The World Bank’s latest Pakistan Development Update has revised down the FY25-26 growth forecast to just 2.6%, compared to the government’s more optimistic projection of around 4%.

“This comes after three years of dismal performance — -0.2% in FY23, 2.5% in FY24, and 2.7% in FY25 — marking what is arguably the worst four-year stretch in Pakistan’s economic history, defined by sustained low growth, record inflation and interest rates, and a collapse in investment confidence.”

As per the World Bank’s latest projections, Pakistan’s economy is projected to grow modestly by 2.6% in FY2025-26, as catastrophic floods weigh on agricultural output and inflation pressures resurface.

The report further noted that Pakistan’s inflation rate dropped to single digits in FY 2024/25, as price increases for food and energy eased. “However, disruption to food supply chains, due to ongoing catastrophic floods, is expected to push inflation up through 2027,” it projected.

Former Federal Finance Minister Miftah Ismail also echoed similar views, saying that “in terms of growth, these FY22-23 to FY25-26 are the worst four years in Pakistan’s history.”

Miftah criticised the government for avoiding key reforms, including privatisation, downsizing ministries, and strengthening local governance, arguing that authorities are instead “purchasing stability through low growth” by keeping interest rates, taxes, and utility tariffs high.

“The result is: increased unemployment, poverty and political alienation.”

Meanwhile, Asad maintained that Pakistan’s economy “may have stabilised — but it has not recovered”.

The economist pointed out that industrial output remains weak, whereas “agriculture is in deep crisis amid climate shocks and policy distortions, and job creation has stalled”.

“Stability is not success,” he stressed, warning that without credible reforms to restore investor confidence, strengthen governance, and shift resources toward productivity and exports, Pakistan risks institutionalising stagnation as its new normal.

The deadline for price offers in the new international tender is October 6, with sugar arrival in Pakistan sought around November 15.

Traders said that following continued price negotiations in its previous tender reported on September 23, the TCP bought about 50,000 tons of fine grade sugar at and estimated $530 a ton cost and freight included (C&F) from ED&F Man and about 30,000 tons of medium grade from Al Khaleej Sugar at an estimated $568 a ton C&F.

Pakistan gets offers in 100,000 metric ton sugar tender, traders say

Reports reflect assessments from traders and further estimates of prices and volumes are still possible later.

The tender continued a series of purchases after Pakistan’s government approved plans to import 500,000 tons of sugar to help maintain price stability after retail sugar prices in the country rose sharply.

Vitol will deliver a 1 million-barrel cargo of West Texas Light (WTL) crude in November under Cnergyico’s term supply arrangement with the European trader, Vice Chairman Usama Qureshi said.

“This is our second cargo, our trading team evaluated various crude for November and found WTL’s gross refining margin to be slightly better than (Gulf) crude,” Qureshi said.

“If economics remain favourable, we intend to keep importing.”

CCoE approves amendments to refineries policy

The decision comes weeks after the first-ever US crude cargo for Pakistan set sail from Houston on the Suezmax tanker Pegasus, chartered by Vitol, ship-tracking data from Kpler showed.

The ship is due to dock in Karachi in late October.

Pakistan signed a landmark trade deal with Washington in August that paved the way for US energy imports in exchange for lower tariffs on Pakistani exports.

President Donald Trump has pushed foreign partners to boost US oil purchases under such agreements.

The country has until now sourced almost all its crude from Middle Eastern suppliers.

Cnergyico, which operates Pakistan’s only single-point mooring terminal capable of handling large tankers, is considering more US purchases of at least 1 million barrels if market conditions stay supportive, Qureshi said.

However, a rise in shipping costs and higher spot premiums for West Texas Intermediate crude, a benchmark US crude stream, have threatened to shut the arbitrage for November-loading US crude cargoes to Asia.

Cnergyico also plans to expand capacity with a second offshore terminal and long-term upgrades, Qureshi said, betting on a rise in domestic fuel demand.