Agriculture losses may push inflation higher
Latest economic outlook has highlighted both encouraging signs and looming risks, as heavy rains and flooding threaten the country’s agriculture and food supply chains.
The Finance Ministry’s report said that the fiscal year 2025–26 began on a strong note, supported by stable exchange rates, rising exports, and increasing remittances. Credit rating agencies also improved Pakistan’s standing in global markets.
But the gains could be short-lived, the ministry warned, if climate change continues to hit agricultural productivity. The sector’s growth target of 4.5 per cent may not be achieved after widespread crop losses. Disruption in food supply could also trigger higher inflation, which stood at 4.1 per cent in July and is expected to edge up to 5 per cent in August.
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On the external side, the report showed encouraging progress. Remittances reached $3.21 billion in July, a 7.4 per cent increase from last year. Exports climbed by 16.2 per cent to $2.74 billion, while imports grew by 11.8 per cent to $5.40 billion. The current account deficit narrowed to just $0.254 million, while foreign investment and reserves increased.
Domestically, the Federal Board of Revenue reported strong tax revenue growth, while industrial activity showed signs of revival, particularly in automobiles and fertilisers. A soft monetary stance, with the interest rate falling from 19.5 per cent to 11 per cent over the past year, has boosted investor confidence. Company registrations surged by 41.6 per cent in July, with over 4,000 new businesses launched.
The ministry added that favourable global conditions and a trade agreement with the United States could provide further momentum. However, officials stressed that recurring climate disasters pose a long-term threat to economic stability and growth.