ISLAMABAD: With an improved 4.2 per cent economic growth forecast for next year, the Ministry of Planning and Development cautioned on Monday about the re-emergence of external sector pressure amid easing import control and debt repayments.
“The external sector may face pressure, as easing import controls and debt repayments are likely to widen the current account deficit,” said the Ministry of Planning and Development in its Annual Plan 2025-26. However, it forecast strong remittances and export recovery and anticipated external financing to cushion these pressures and support external sustainability.
Yet, the planning ministry did not forecast any major increase in industrial sector output compared to the current year, which missed most of the targets set for various sectors of the real economy.
The Annual Plan Coordination Committee (APCC) projected Pakistan’s economy to grow by 4.2pc in 2025-26, signalling expectations of a broad-based recovery against 2.7pc GDP growth during the current fiscal year against 3.6pc target, the planning ministry said. Pakistan’s economy has experienced repeated boom and bust cycles, as growth is often followed by balance of payment challenges due to increased import needs.
Cautions liberal imports to widen current account deficit
It forecast the commodity-producing sectors to expand by 4.4pc in FY26, driven by a 4.5pc rebound in agriculture and 3.5pc positive growth in Large-Scale Manufacturing. Both agriculture and LSM sectors missed targets during the current year by a wide margin as agriculture grew by 2.3pc against a 3.1pc target and LSM contracted by 1.5pc against a targeted 3.5pc growth.
It said the agriculture growth will be supported by a recovery in important crops (6.7pc) and cotton ginning (7pc), as well as robust performance in livestock. During the current year, imported crop output contracted by 13.5pc against an estimated 4.5pc fall, while cotton ginning contracted by 19pc against a 2.3pc decline. Livestock, however, showed better than growth at 4.7pc when compared to 3.8pc growth target.
The industrial sector is expected to benefit from a significant revival in LSM with 3.5pc growth, the planning ministry said with 3pc growth in mining and quarrying, “alongside sustained growth momentum in Construction and Energy, Gas and water supply”. The services sector, which forms the largest share of GDP, is set to grow by 4pc, underpinned by stronger performance in wholesale and retail trade, transport, storage and communications, financial services and real estate.
“These projections reflect cautious optimism, contingent on effective macroeconomic management and stable external conditions,” the planning ministry said.
It forecast national savings to remain at 14.3pc of GDP in FY 2025–26, financing a total investment of 14.7pc of GDP, up from 13.8pc in FY 2024- 25. This reflects a narrowing saving investment gap to be financed through modest external inflows.
Public investment is projected to increase from 2.9pc to 3.2pc. Similarly, private investment is also projected to rise from 9.1pc of GDP to 9.8pc. Fiscal and monetary policies will aim for consolidation and stability, with an expected inflation of 7.5pc due to the low base effect and risk of ongoing trade tensions and domestic tariff rationalisation measures.
Published in Dawn, June 3rd, 2025
