Pakistan Outlook-2026 |
In certain areas, there are clear signs of substantial growth that have contributed to the recovery of Pakistan’s economy. A significant boost comes from the IMF’s timely approval of fund releases, facilitating negotiations and borrowing from other donors to address financial shortfalls.
The efforts of fiscal and monetary authorities to implement necessary measures aimed at reducing inflation towards targeted levels are noteworthy, facilitating the State Bank of Pakistan (SBP) to lower its policy rate nearly by half to 10.50 percent.
Remittances also play a vital role, showing consistent and remarkable growth even in challenging times. It is promising to see an increase in the State Bank of Pakistan’s net reserves this fiscal year, with expectations that this upward trend will continue through the year’s end.
Moreover, growth in Pakistan’s information technology (IT) sector, with the potential to exceed USD 5 billion, is particularly encouraging. However, this is an area where the government must develop more favourable and effective policies to sustain growth.
A crucial aspect of supporting the IT sector’s growth is its nature as a service provider, unlike other exporters, it does not require significant foreign currency for raw materials. While the textile sector has valid reasons to advocate for lower energy costs, rebates, and currency depreciation, data over the past two decades reveals that the costs remain excessively high with minimal returns.
The depreciation of the Pakistani Rupee against the US Dollar has led to skyrocketing prices for basic necessities, with inflation severely impacting citizens.
The low tax-to-GDP ratio is an indicator of weaker economic performance and needs to be increased by 5 percent to 10 percent to relieve pressure on debt financing, facilitate borrowing, and provide the government with more room for spending.
Another metric to monitor growth is the advances-to-deposits ratio (ADR) of banks. Rather than looking solely at year-end figures, which can be influenced by efforts to create healthy balance sheets, it is more insightful to analyze the monthly data released by the State Bank of Pakistan to better understand real progress and growth.
Pakistan has the potential for significant advancement by reducing bank investments in government securities to around Rs 6 trillion.
Currently, the Open Market Operation (OMO) amount is Rs 12.743 trillion (Conventional Rs 12.370 trillion and Islamic Rs........