Pakistan's finance minister says economy grows 3.7% in FY26, remittances to cross $41b

Finance Minister Muhammad Aurangzeb announced on Thursday that the size of Pakistan’s economy has risen above $452 billion, with per capita income increasing 9% to $1,901, as he unveiled the annual Economic Survey a day before unfolding of the federal budget.

Economic growth expanded by 3.7% in the outgoing fiscal year — the highest rate in four years — despite floods, a regional conflict in the Middle East and global uncertainty.

"We have not only increased the size of the economy but also achieved a broad-based recovery,” Aurangzeb said.

The services sector grew by 4.9%, while cement demand increased by 10%. Large-scale manufacturing growth hit 6.1%, the highest in four years. Sixteen of the country’s 22 manufacturing sectors recorded growth during the year. Remittances are expected to cross $41 billion this year.

Foreign exchange reserves stand above $17 billion, and by the end of June, the State Bank expects them to exceed $18 billion. Overall, foreign exchange reserves reached $22.6 billion. The agriculture sector grew 2.89%, with a 17% increase in fertiliser sales. Dairy and livestock have a 60% share in the agricultural economy.

The fiscal deficit stood at 0.7% of GDP, while the primary balance remained in surplus. Federal Board of Revenue (FBR) revenues increased by 10.1%, and the current account posted a surplus of $72 million. The tax base has doubled in a few years from Rs7 trillion to Rs13 trillion. FBR revenues saw a 46% increase in June 2026, and tax revenue grew 40% over the past two years. Private sector credit stood at $11.57 billion.

Inflation has come as a result of the second-order impact of the international oil surge, but overall energy has been managed well. "In April, the oil import bill rose by $1 billion, but in May Pakistan managed to restrict the increase to $500 million,” Aurangzeb said. Pakistan’s total installed electricity capacity is 49,651 MW, comprising hydel (23.4%), thermal (49.2%), nuclear (7.1%) and renewables (20.3%).

The finance minister also highlighted that Pakistan-made footballs will be used in the upcoming FIFA World Cup. He said 175,000 new investors have entered the equity sector, and for the first time in 20 years, 11 initial public offerings (IPOs) were completed this year. Roshan Digital Accounts received an overall investment of $12.75 billion.

While some companies have left Pakistan, many global firms including Aramco, Alibaba, Turkish Petroleum, Veon and Google have increased their investments, he said. "We remain in contact with all friendly countries including Saudi Arabia and China,” he added. He said 40-45% of the debt is concessional, long-term and bilateral, and the debt-to-GDP ratio is continuously declining. Foreign debt stood at $137.56 billion.

Planning Minister Ahsan Iqbal said Pakistan had failed to build an export-led economy. "Nine million overseas Pakistanis send $40 billion annually, while 250 resident Pakistanis make only around $40 billion in exports,” he said. "Exports must meet our external sector requirement, which is a structural flaw.”

The export shortfall attributable to Afghanistan amounts to approximately $1 billion.

"Economic growth is not a T20 match; rather, we have become used to playing T10,” Iqbal said. "We have made mistakes, and we have to rectify them.” He stressed that political consistency is essential for growth, evident in all neighbouring countries.

"Either we will crawl or leapfrog - we cannot afford to crawl now.” Pakistan receives only $1.5-2 billion in foreign direct investment due to a lack of policy continuity. Portfolio investment fell $550 million.

Aurangzeb noted that the growth rate for the current fiscal year is expected to be over 4%. "Looking at indicators of the conventional economy is no longer suitable; a new paradigm is needed in the age of AI,” he said. Local investment of $1.2 billion came from the privatisation of PIA and the spectrum auction. The Panda bond was successfully issued.