EDITORIAL: The Finance Division released May and June Economic Update and Outlook on the last day of the fiscal year 2025-26.
It is hoped that one-month delay in uploading the May report, attributed to the focus of the Division on the budget for next fiscal year, was available to the domestic (the Finance Ministry and those under its administrative control including the Federal Board of Revenue) and foreign stakeholders (International Monetary Fund fielded a mission in the country from 13 to 20 May and noted in its press release dated 20 May that “discussions on the FY2027 budget will continue in the coming days.”) Be that as it may, most of the data uploaded by the Finance Division is, as is the norm, with a two-month lag though some data is more current, for example PSX index, market capitalization, which reveal remarkable performance, and bafflingly even tax revenue, which is normally up to date and available with the FBR.
The obvious question is: what are the macroeconomic changes that the country experienced from May to June, given that the Middle East conflict has not yet restored the oil flows to pre-28 February levels with a persisting concern over fiscal space remaining narrow, thereby necessitating higher target collections by the FBR on the one hand and, in case of a shortfall, to raise the petroleum levy that has no upper limit as per an Ordinance (credited under other taxes so that it is not part of the federal divisible pool) to levels that would minimize the fiscal deficit.
The June data improved over May on three major counts. First, remittance inflows rose from 33.9 billion dollars (July-March) to 38.1 billion dollars (July-April), an inflow that has done much to ease the pressure on the current account.
While economists are warning that remittances may actually decline due to geopolitics; however, the Middle East regional order is in transition and one would be well advised to wait before making a definite prediction in this regard. Thus the current account was negative 252 million dollars July-April and positive 255 million dollars July-May.
Second, there was an uptick in the non-tax revenue in the June data – from 4426.9 billion rupees July-March to 4621.8 billion rupees July-April. This can be attributed to the presidential ordinance dated 14 April that removed the upper limit and empowered the government to raise the levy at will. This is an easy to collect sales tax and, needless to add, impacts negatively on the pocket book of households regressively as its incidence on the lower income levels is higher than on the rich.
And finally, June also witnessed a lower negative portfolio investment – from negative 1.377 billion dollars July-April to negative 1.145 billion dollars July-May and a slight uptick in foreign direct investment – from 1.409 billion dollars July-April to 1.623 billion dollars July–May.
And credit to the private sector declined slightly from 880.6 billion rupees July to 15 May to 873.3 billion rupees July-12 June, which raises questions as to why and how did credit decline in June; however, it may have been used to justify the decline in Large Scale Manufacturing sector growth by 0.1 percent – from 6.5 percent July-March to 6.4 percent July-April.
The introduction of the two updates is over-optimistic with the May report noting that “in the outgoing fiscal year, Pakistan’s economy continued to improve and rebuild confidence despite regional geopolitical tensions and energy-related shocks,” with the June Update claiming that “Pakistan’s economy is concluding FY2026 on a stronger footing, with improved macroeconomic stability and sustained recovery in economic activity.”
The conclusions of the two reports also do not vary with the May Update, stating that “activity in Pakistan’s major export markets remains broadly in line with the trend, suggesting that external demand may remain supportive, subject to geopolitical risks and the June,” while the June Update maintained that “activity in Pakistan’s major export markets…..remains broadly in line with their long-term potential, suggesting supportive external demand.”
Sadly, no mention is made of the rise in unemployment levels – cited at 22 percent by independent economists, drawing data from the Labour Force Survey by the Pakistan Bureau of Statistics and neither is there any mention of the rise in poverty levels estimated by the World Bank at a high of 44 percent based on a calorific measure.
It is hoped that the Updates will start reporting, if not highlighting, poverty levels and unemployment data as well in order to better assess the impact of the ongoing severely contractionary monetary and fiscal policies (Including administrative measures to raise utility rates) as dictated and agreed with the IMF under the ongoing programme on the general public, instead of being a treatise on achievements that are simply not being felt at the grass root level.
Copyright Business Recorder, 2026
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