Finance ministry flags risk to Pakistan's external sector amid global uncertainty

“External demand may remain supportive in some markets but the balance of risk becomes less favourable than in a pre-war setting,” the ministry said in its Monthly Economic Update and Outlook for April 2026.

It said the ongoing Middle East conflict was posing new risks and heightened uncertainty regarding the macroeconomic outlook.

The ministry forecast April’s inflation rate — measured by the consumer price index — at 8 to 9pc, significantly higher than 7.3pc in March.

It highlighted that the overall primary surplus in the first eight months of the current fiscal year was recorded at 3.3pc of GDP (Rs4.319 trillion) as compared to 3pc (Rs3.452tr) last year.

During July-March Fiscal Year 2026, the Federal Board of Revenue’s tax collection grew by 10.1pc to Rs9.306tr, the ministry said.

It said this growth was driven by both direct and indirect taxes, which grew 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.

It said the government’s strategy to optimise revenue collection and improve expenditure management was reflected in the overall fiscal position during the July-February FY2026, with a deficit of 0.1pc of GDP (Rs161.2 billion) compared to 2.2pc of GDP (Rs2.524bn) during the corresponding period last year.

Net federal revenue increased by 10.1ppc to reach Rs7.463tr, which was contributed to by growth in both tax and non-tax revenues by 10.6pc and 7.7pc, respectively.

“Total federal expenditure declined by 10.9pc to Rs9.232tr. This contraction was mainly driven by curtailment of current expenditure, which fell by 11.4pc on account of 25pc decline in markup expenditure,” it said.

The ministry said the economy completed its third quarter of the year on a stable footing, underpinned by macroeconomic stability and gradually strengthening growth momentum.

On the domestic front, the manufacturing sector continued its growth impetus while the external sector witnessed three consecutive monthly current account surpluses driven by strong remittances and rising IT exports, it added.

|Inflation inched up but remained within the annual target. Prudent fiscal management enabled continued improvement in the fiscal position. Timely Eurobond repayment, successful International Monetary Fund staff-level agreement and Fitch’s B- rating with stable outlook further reinforced external credibility, reflecting continued reform efforts and overall positive direction of the economy,” it said.

It highlighted that the ongoing Middle East conflict was posing new risks and heightened uncertainty regarding the macroeconomic outlook amid escalating energy costs, yet Pakistan’s economy appeared relatively better positioned than in previous episodes of external stress to manage these emerging challenges effectively.

The ministry also said that the Bureau of Emigration and Overseas Employment registered 50,506 workers in March 2026, showing a reduction of almost 14pc as compared to 58,555 in March, 2025.

According to the ministry, despite prevailing geopolitical uncertainties, key macroeconomic indicators had remained stable, including sustained growth momentum in large-scale manufacturing, particularly reflected in a broad-based recovery in the automobile sector, and rising cement dispatches, pointing to improving domestic demand.

“Based on this momentum, economic activity is expected to remain firm,” it said, but hastened to add that “amid ongoing supply chain constraints, inflation is anticipated to remain within the range of 8-9pc for April 2026”.

It added that “despite the potential risk posed by Middle East war and consequently global commodity prices rise and supply chain disturbance, the external position is likely to remain stable, underpinned by higher remittance inflows and IT exports”.

“Overall, the economy appears well-positioned to continue its growth trajectory, supported by the strengthening of macroeconomic fundamentals vis-à-vis appropriate and swift policy response to minimise the adverse impacts,” the ministry said.

The ministry said that given ongoing geopolitical uncertainty and the unclear path toward a durable settlement, the conflict continued to reverberate through disrupted oil supply and pricing, reinforcing volatility in global energy markets.

“Despite global emerging uncertainties, major trading partners of Pakistan’s economy, like the US, are showing resilience,” it added.

Likewise, it said that Pakistan’s major export destinations (except China, showing persistent moderation in growth momentum for several months) were hovering near their long-term potential.