Finance Minister Says Pakistan’s Economy in ‘Recovery Mode’

Finance Minister Muhammad Aurangzeb has said Pakistan’s economy is firmly in recovery mode, with growth expected to accelerate and inflation projected to ease further in the next fiscal year, although regional geopolitical tensions remain a key risk to the outlook.

Speaking to Bloomberg, Aurangzeb said the economy is expected to grow by 4 percent in fiscal year 2026-27, while average inflation is forecast to decline to 8.2 percent from 11.7 percent.

He attributed the improvement to economic stabilization measures undertaken over the past two years.

The finance minister said Pakistan is in a strong fiscal position, pointing to a historically low fiscal deficit and the achievement of a primary surplus. He added that foreign exchange reserves have improved to a level equivalent to at least three months of import cover, but emphasized that sustainable economic progress would require a shift toward export led growth.

Aurangzeb’s comments come days after the government unveiled its federal budget for fiscal year 2026-27, which includes business tax relief measures aimed at supporting investment and economic expansion while maintaining fiscal discipline. The government has set a tax revenue target of Rs. 15.3 trillion for the upcoming fiscal year, a goal the finance minister described as ambitious but achievable.

He said the budget marks a transition from economic stabilization to sustainable growth, providing a roadmap for expanding economic activity while preserving hard won fiscal gains. The government has focused on improving revenue collection, strengthening public finances, and creating conditions for long term investment and export growth.

Pakistan’s fiscal deficit has narrowed to its lowest level in nearly two decades following a period of spending restraint, tax reforms, and measures implemented under the International Monetary Fund supported reform program. The country’s improving fiscal position helped secure a fresh IMF disbursement of $1.3 billion last month.

Despite the improving outlook, Aurangzeb cautioned that developments in the Middle East remain a significant uncertainty. Rising geopolitical tensions and their potential impact on energy markets could affect inflation, external balances, and economic growth prospects in the months ahead.

The finance minister said maintaining macroeconomic stability remains the government’s top priority as it seeks to build on recent gains and place the economy on a path of stronger and more sustainable growth.