ISLAMABAD: Pakistan’s improved macroeconomic conditions contributed to an uptick in growth in fiscal year 2025 (ended 30 June 2025), underpinned by increased investment driven by continued policy reforms and economic stability, the Asian Development Bank (ADB) said in a report released on Tuesday.
According to the Asian Development Outlook (ADO) September 2025, ADB’s annual flagship economic publication, Pakistan’s growth is projected to continue in the medium term, with real gross domestic product (GDP) growth forecast at 3.0% in FY2026 as macroeconomic stability deepens through sustained reforms addressing structural vulnerabilities.
Economic reform has progressed considerably under the IMF Extended Fund Facility arrangement that began in October 2024. Policy consistency and climate resilience remain vital to maintaining the growth momentum. Downside risks to the outlook remain high.
“Pakistan’s growth prospects remain positive,” said ADB Country Director for Pakistan Emma Fan. “However, the country continues to face structural challenges, compounded by recurring disasters such as the recent floods. In this context, consistent reforms and policy implementation are essential for reinforcing policy credibility, sustaining economic momentum, and enhancing the country’s resilience, Fan added”
In FY2026, economic activity is expected to strengthen, supported by improved external buffers and renewed business confidence following the US-Pakistan trade agreement. However, the damage caused to infrastructure and farmland by the recent floods may weigh on growth.
Recovery and rehabilitation efforts, bolstered by fiscal incentives for the construction sector announced in the FY2026 budget, are expected to partially offset the adverse impact.
Average inflation is projected to increase to 6.0% in FY2026, reflecting the impact of flood-related supply chain disruptions on food prices and the increase in gas tariffs.
In response, the central bank is expected to adopt a cautious approach to easing monetary policy to stabilize inflation within its medium-term target range of 5%–7%.
