Pakistan’s economy grew 3.7% in FY2025-26, missing the government’s 4.2% target announced in last year’s budget, the Economic Survey 2025-26 showed. Finance Minister Muhammad Aurangzeb released the report on Thursday, a day before the federal budget.

“When we entered this fiscal year, there was trade uncertainty on account of the tariff discussion. By the end of July, we reached a competitive position with respect to our exports, especially to the US,” said Aurangzeb.

The finance minister said that Pakistan saw floods after that, and then a regional conflict from March onwards. “So these three were the exogenous factors,” he added.

The survey flagged a mixed performance across key sectors as Pakistan’s economy continued to stabilise under the International Monetary Fund (IMF) programme.

Provisional data showed agriculture expanded 2.9% YoY in FY26. “This is notwithstanding the floods,” he said.

Industrial output rose 3.5% in the outgoing fiscal, driven by manufacturing and construction, while services growth came in at 4.1% in FY26, the highest in four years.

The service sector has remained a strong growth anchor for Pakistan’s economy, as it makes up nearly 58% of the GDP, said Aurangzeb.

Pakistan’s large-scale manufacturing sector (LSM) grew by 6.1% in FY26, which is broad-based growth, said Aurangzeb. “Out of 22 sectors of manufacturing, we have observed growth in 16 sectors, including food, textiles, wearing apparel, etc.,” he said

Pakistan’s fiscal deficit stood at 0.7% of the GDP in FY26, compared to 2.6% last year.

According to the report, the ongoing conflict in the Middle East has become a significant external risk to both the global economy and emerging economies.

Before the conflict, the IMF had projected global growth of 3.3% in 2026 and 3.2% in 2027. However, the IMF revised its growth forecasts downward due to conflict and projected global growth of 3.1% in 2026, followed by a modest recovery to 3.2% in 2027.

Following the outbreak of the conflict in late February 2026, global oil prices surged sharply from approximately $72 per barrel (pre-conflict) to a peak of nearly $120 per barrel.

The Economic Survey provides a comprehensive overview of the country’s economic performance during the outgoing fiscal year and serves as a key policy document ahead of the annual budget.

The government had earlier indicated that the budget would be presented on June 10, but later revised it to June 12.

The upcoming budget is expected to outline the government’s fiscal priorities, revenue measures and expenditure plans for FY27 amid ongoing efforts to stabilise the economy and sustain growth.

NEC targets

The National Economic Council (NEC) on Wednesday approved a Rs3.669 trillion national development outlay for the fiscal year 2026-27, including Rs838 billion in foreign aid and set a GDP growth target of 4%.

The meeting also sanctioned Rs1 trillion for the federal Public Sector Development Programme (PSDP), Rs2.218 trillion for provincial development programmes, and Rs451 billion for state-owned enterprises (SOEs).

The NEC unanimously approved a four-point agenda and revised economic indicators for the outgoing fiscal year 2025-26, allocating Rs820 billion for the federal PSDP, Rs2,938 billion for provincial development programmes, and Rs355 billion for SOEs.

The council approved a GDP growth target of 3.7% for 2025-26.