• Economic Survey shows major targets missed as Aurangzeb claims resilience amid three major shocks
• Says budget to offer incentives for agriculture, housing
• Over Rs900bn to be diverted for Centre’s strategic needs
• Centralised tax system, retailer model to be announced
• Oil price impact to continue next year
• Current account deficit falls to $252m; remittances may reach $41-42bn by year-end
• Fiscal deficit falls to 0.7pc of GDP; debt-to-GDP ratio drops to 68.5pc
• FBR recovers Rs94bn through digitisation, AI audits
ISLAMABAD: The freeze on provincial development programmes, expected to generate more than Rs900 billion in additional resources for the Centre’s strategic needs, will continue for a specific period beyond one year, Finance Minister Muhammad Aurangzeb said on Wednesday as he unveiled the Pakistan Economic Survey 2025-26, which showed missed targets across major economic sectors in the outgoing fiscal year.
Reviewing the economic report card, the minister said the economy grew by 3.7 per cent this year — almost the same as the 3.6pc reported at this stage last year, later revised down to 3.2pc — reflecting resilience and economic stability in the face of three major exogenous shocks: global trade and tariff challenges at the beginning of the fiscal year, floods in Pakistan and, finally, regional war-related pressures.
Aurangzeb, who was flanked by the ministers for planning and information, the minister of state for finance and the railways minister, said he would explain in detail in his budget speech the mechanism for utilisation of additional resources secured from the provinces through the development freeze.
Asked whether the understanding outside the National Finance Commission, formalised at the National Economic Council meeting a day earlier, was permanent or limited to one year, he said the arrangement would be for a specific period beyond one year.
The finance minister appreciated the Khyber Pakhtunkhwa government and the “impressive engagement” with Chief Minister Sohail Afridi during the NEC meeting on Tuesday. He also valued the contribution of Muzzammil Aslam, saying the IMF programme was not only an agreement of the finance ministry or the Centre but of the entire country.
The minister said the government would offer special incentives for agricultural productivity and the housing sector in the budget on Friday (today) and provide end-user interest rates in single digits for 10 years.
He said the trade policy for the auto sector had already been announced for five years to provide a forward-looking vision because domestic investment had to pick up before foreign investment could follow.
The minister said discussions with the IMF were progressing positively. He declined to comment on relief for the salaried class, saying the prime minister had given clear instructions on the sectors that needed to be focused on, including salaried individuals and documented businesses.
He said a new taxation operating model for retailers and a “faceless” tax system — a digital and centralised system involving no contact between officials and taxpayers — would also be announced in the budget.
Responding to a question on the contingency plan in case the Iran crisis prolonged, the minister said the oil import bill had an impact on Pakistan’s external account. He said the oil bill had increased by about $1bn in April and later dropped to about $500 million in May as government policies with regard to taxation took shape.
He said the impact of oil prices on energy would continue over the next year and the government had a contingency plan in mind.
Missed targets
Aurangzeb said the economic recovery was broad-based this year, with 3.7pc growth — the highest in the last three years — supported by 2.89pc growth in agriculture, 3.5pc in industry and 4.09pc in services.
Except for services, all targets were missed. The targets had been set at 4.2pc for GDP growth, 4.5pc for agriculture, 4.3pc for industry and 4pc for services. Large-scale manufacturing, he said, increased the most in the last four years to 6.1pc, while 16 out of 22 sectors showed positive trends.
The investment-to-GDP ratio came in at 14.38pc against a target of 14.7pc, while the national savings-to-GDP ratio stood at 14.13pc against a target of 14.3pc. The minister said not only investment and savings ratios, but also the revenue-to-GDP ratio remained low and should be in the “high teens”.
The minister said growth was on its way to the target at the start of the year, when only trade uncertainty was in the field, but two subsequent floods in August-September and the regional war in March tested Pakistan’s resilience. Still, Pakistan kept its journey from stability to growth on track, he said.
However, he said the reality was that Pakistan still had a long way to go and must stay the course of reforms and fiscal discipline.
He said the size of the economy increased by 11pc to a record Rs126.87 trillion from Rs114.04tr last year, while per capita income improved to $1,901 in the outgoing fiscal year from $1,751 in FY25, reflecting improved economic activity and income growth.
The finance minister said the current account deficit dropped to just $252m in the first 10 months of the year, down from $17.4bn in FY22, as remittances reached $4.25bn a month in May — the highest in the country’s history — and were well on their way to reaching $41bn to $42bn by year-end against a target of $39bn.
Exports faced challenges and were down by 5pc, mainly because of a $1.5bn decline in rice and sugar exports. Foreign exchange reserves held by the State Bank had already crossed $17.1bn and would touch $18bn to provide three months of import cover, a respectable level recognised globally, he said.
He said the fiscal deficit at 0.7pc of GDP in the first nine months was the best performance in decades and had come down from a peak of 8.4pc in FY22. This helped the primary balance reach 3.2pc of GDP in nine months, down from a 3.1pc primary deficit in FY22.
The minister said the debt-to-GDP ratio had fallen to 68.5pc this year, down from 75.2pc in FY23 and 70.7pc in FY24, meaning that debt sustainability was also improving.
The minister said FBR revenue collection increased by more than 10pc this year, adding that the revenue agency recovered Rs60bn in additional revenue from the cement and sugar sectors through digitisation and another Rs34bn through artificial intelligence-based audits of 800 high-risk cases. This would be expanded to other sectors in the next budget.
He said he welcomed criticism over a new scheme for traders but noted that 3m to 4m small traders were outside the tax net and a start had to be made somewhere.
Responding to a question on why the success stories he cited had not benefited the common man or led to higher growth, the minister said growth could be achieved in three months by pumping liquidity into the system, but that would not be sustainable, as past experience had shown.
Published in Dawn, June 12th, 2026