ISLAMABAD: The government on Friday highlighted downside risks of geopolitical uncertainty and commodity price volatility to otherwise improving economic growth prospects in Pakistan.

“Downside risks persist, particularly from geopolitical uncertainties and global commodity price volatility,”

said the Ministry of Finance in its Economic Outlook for February, adding, however, that prudent macroeconomic management would help safeguard the stability.

The MoF also projected inflation to be 6-7pc in February. It said economic activity was expected to maintain its upward trajectory in FY26, supported by sustained macroeconomic stability, easing inflationary pressures, and an improved fiscal position. “The accommodative monetary policy, alongside continued fiscal consolidation and structural reforms, is likely to reinforce business confidence and private sector activity”, it added.

Finance ministry cites uncertainty, commodity price volatility; projects inflation at 6-7pc in February

Growth is projected to be driven by a rebound in LSM, improved remittances, and resilient agricultural performance, while the external sector is expected to remain manageable amid a stable exchange rate and contained current account pressures.

It said Pakistan’s economy entered the third quarter of FY26 with improved macroeconomic fundamentals. Exch­ange rate stability, sustained growth in workers’ remittances, and rising IT exports have collectively contributed to a manageable current account position, strengthening the external sector.

Inflation remained within the target range, while monetary easing reduced borrowing costs across the economy, supporting overall financing conditions. High-frequency indicators show a considerable pickup in output. Fiscal consolidation has improved, with a surplus in both fiscal and primary balances.

In parallel, a sizeable portion of public debt was retired ahead of schedule, marking a significant step in prudent debt management. Alongside these improvements, the Rs38bn Ramazan Relief Package has enhanced the country’s social safety net. “Overall, the growth prospects have improved significantly, with momentum likely to strengthen in the remaining fiscal year, leading towards sustainable economic growth”, it said.

The report said better input availability underpinned the wheat production outlook. This is despite the fact that the report conceded lower wheat sowing this season. “During the Rabi season 2025-26, wheat has been sown on an area of around 23.1 million acres, compared to the target of 23.8m acres, with targeted production at 29.7m tonnes”.

The use of agricultural inputs is advancing steadily, backed by government efforts to boost productivity through the supply of quality seeds, access to agricultural credit, farm mechanisation, and adequate fertiliser availability. On the input side, imports of agricultural machinery and implements increased by 10.5pc to $76.8m during July-January FY26, from $69.5m last year.

During Rabi 2025-26 (October-January), urea offtake recorded at 2,744 thousand tonnes (12pc higher than Rabi 2024-25), whereas DAP offtake remained 583 thousand tonnes.

The report said the growth momentum in LSM remains strong, as it expanded 4.8pc during July-December FY26, up from 1.8pc a year ago, mainly driven by the automobile, wearing apparel and coke and petroleum products, with contributions of 1.6pc, 1.3pc and 1pc, respectively. During the period, 14 sectors recorded positive growth, including textile, wearing apparel, non-metallic mineral products, food, beverages, coke & petroleum products, electrical equipment, automobiles and tobacco.

Published in Dawn, February 28th, 2026