• MoF warns external risks rising despite fiscal stability
• Sees April inflation jumping to 8-9pc on supply issues

ISLAMABAD: Despite a healthy primary balance of 3.3 per cent of GDP, the Ministry of Finance (MoF) on Thursday warned that Pakistan’s external sector may face risks due to emerging global uncertainties and regional supply disruptions, amid higher inflation.

“External demand may remain supportive in some markets, but the balance of risk has become less favourable than in the pre-war setting,” the MoF said in its Monthly Economic Update and Outlook for April. It added that the ongoing Middle East conflict is posing risks and increasing uncertainty for the macroeconomic outlook.

The MoF forecast April inflation, measured by the Consumer Price Index, at 8-9pc, significantly higher than 7.3pc in March.

It highlighted that the primary surplus in 8MFY26 was recorded at 3.3pc of GDP (Rs4.319 trillion), compared to 3pc (Rs3.452tr) last year. During July-March FY26, FBR’s tax collection grew by 10.1pc to Rs9.306tr. This growth was driven by both direct and indirect taxes, which rose by 12.4pc and 7.9pc, respectively. Within indirect taxes, sales tax, customs duties and federal excise duty increased by 8.5pc, 3pc and 13.3pc, respectively.

The government’s strategy to optimise revenue collection and improve expenditure management was reflected in the fiscal position during the first eight months of FY26, with a deficit of 0.1pc of GDP (Rs161.2bn), compared to 2.2pc of GDP (Rs2.524tr) in the same period last year.

Net federal revenue increased by 10.1pc to Rs7.463tr, supported by growth in both tax and non-tax revenues of 10.6pc and 7.7pc, respectively. Total federal expenditure declined by 10.9pc to Rs9.232tr, mainly due to a reduction in current expenditure, which fell by 11.4pc on account of a 25pc decline in markup payments.

The economy completed its third quarter on a stable footing, underpinned by macroeconomic stability and gradually strengthening growth momentum. On the domestic front, the manufacturing sector maintained its growth momentum, while the external sector recorded three consecutive monthly current account surpluses, driven by strong remittances and rising IT exports.

Inflation inched up but remained within the annual target. Prudent fiscal management supported continued improvement in the fiscal position. Timely Eurobond repayment, a successful IMF Staff-Level Agreement, and Fitch’s B- rating with a stable outlook reinforced external credibility, reflecting ongoing reform efforts and the economy’s overall positive direction.

The report noted that regional tensions are adding uncertainty amid escalating energy costs, but Pakistan’s economy appears better positioned than in previous episodes of external stress to manage these challenges.

The Bureau of Emigration & Overseas Employment registered 50,506 workers in March, a reduction of almost 14pc compared to 58,555 in the same month last year.

Despite geopolitical uncertainties, key macroeconomic indicators have remained stable, including sustained growth in Large-Scale Manufacturing, a broad-based recovery in the automobile sector, and rising cement despatches, pointing to improving domestic demand. “Based on this momentum, economic activity is expected to remain firm,” it said, but added that “amid ongoing supply chain constraints, inflation is likely to remain in the range of 8-9pc in April.”

It added that despite risks from regional tensions, including higher global commodity prices and supply chain disruptions, the external position is expected to remain stable, supported by higher remittance inflows and IT exports. Overall, the economy appears well positioned to sustain its growth trajectory, backed by strengthening macroeconomic fundamentals and timely policy responses to minimise adverse impacts.

The MoF said that continued geopolitical uncertainty and the lack of a clear path to resolution are affecting oil supply and pricing, reinforcing volatility in global energy markets. Despite global uncertainties, major trading partners, such as the US, are showing resilience. Likewise, Pakistan’s key export destinations — except China, where growth has slowed in recent months — are operating near their long-term potential.

Published in Dawn, May 1st, 2026