Severe rainfall and flooding across the country have been declared a major threat to the national economy, with the government facing increased financial pressure.
Concerns have been raised over disruption to the food supply and a possible rise in inflation, according to the Ministry of Finance’s Monthly Economic Update and Outlook report.
The report stated that the Pakistani economy entered the fiscal year 2025–26 on a positive note. Global credit rating agencies have improved Pakistan’s economic outlook. However, the impact of climate change may undermine the agricultural sector’s targets.
Due to recent weather-related damage, particularly in agriculture, the sector’s annual growth target of 4.5 per cent may be significantly affected. Disruption to the supply of essential food items could lead to price increases.
The Finance Ministry cautioned that while inflation in July remained moderate at 4.1 per cent, it may rise to 5 per cent in August. Despite these challenges, the report noted that the external sector remains stable. The current account deficit has declined, and the exchange rate has remained steady.
According to the report, remittances rose by 7.4 per cent in July 2025, reaching $3.21 billion, while exports recorded a 16.2 per cent increase to $2.74 billion. Imports during the same period grew by 11.8 per cent, totalling $5.40 billion. Direct foreign investment and foreign exchange reserves also increased. The current account recorded a deficit of $0.254 million, while the exchange rate stabilised at Rs281.
The Federal Board of Revenue (FBR) achieved significant growth in tax and non-tax revenues. Global economic conditions are reported to be favourable, and a trade agreement with the United States is expected to boost exports. The revival of large-scale industries continues, with improvements in automobile and fertiliser production likely to support further economic momentum. A soft monetary policy is expected to improve business confidence.
Over the past year, the interest rate declined from 19.5 per cent to 11 per cent. Company registrations in July rose by 41.6 per cent, with over 4,000 new companies registered. Agricultural lending increased, though credit to the private sector saw a decline.
