Islamabad (GNP): The Asian Development Bank (ADB) has projected Pakistan’s economic growth rate at 3.7 per cent for the current fiscal year, below the government’s 4 per cent budget target. The Manila based lender maintained its earlier July forecast in its latest Asian Development Outlook released on Wednesday. It had previously projected 4.5 per cent growth in its April 2026 outlook.
The bank also forecast average inflation at 8.3 per cent for the fiscal year, higher than the official estimate of 7 per cent. It cited elevated energy, logistics and agricultural input costs as key drivers of the projection, which sits above the central bank’s medium term target range of 5 to 7 per cent.
ADB flagged the conflict in the Middle East as a significant downside risk to Pakistan’s outlook. It warned that any escalation could raise energy import costs, intensify inflation and disrupt labour markets in Gulf economies, which would in turn affect remittances sent home by overseas workers.
The bank also warned that renewed austerity measures by the Pakistan government could weigh on domestic demand and economic activity. This risk would be more pronounced if expenditure restraint proved sharper than currently anticipated, adding further pressure to an already cautious growth outlook.
Additional risks highlighted by the bank included tighter global financing conditions, shortfalls in tax revenue, weather related agricultural shocks and delays in energy sector and state owned enterprise reforms. ADB stressed that consistent implementation of reforms remained critical to reinforcing fiscal and external stability and sustaining investor confidence.
Despite these risks, ADB noted that Pakistan’s economic performance continued to strengthen through fiscal year 2026, with growth accelerating to 3.7 per cent from 3.2 per cent a year earlier. The expansion was broad based, supported by resilient services, a rebound in manufacturing, recovery in agriculture and stronger private investment.
ADB Country Director for Pakistan Emma Fan said, “Pakistan’s economy has made progress in strengthening macroeconomic stability over the past two years.” She added that maintaining reform momentum would be critical to unlocking higher private investment and achieving stronger, more inclusive growth.
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Agriculture grew by 2.9 per cent during the year despite flood related losses to major crops, while private investment rose by 8.6 per cent amid lower borrowing costs and improved business confidence. Fiscal consolidation also continued through the year, with gross international reserves increasing to strengthen external resilience.
Pakistan’s sovereign credit ratings were upgraded by S&P in July 2026 and by Moody’s in August 2026, reflecting improved macroeconomic stability and continued reform implementation. The country also regained access to international capital markets through Eurobond and Panda bond issuances in April and May 2026.
Inflation for the fiscal year averaged 7.1 per cent, up from 4.5 per cent the previous year, as rising food prices and higher global oil prices intensified pressure on domestic prices during the second half of the period.
Managing Editor at Global News Pakistan (GNP), with a Bachelor's degree in International Relations from Riphah International University, graduated with a Gold Medal. Reach out at sabahtareengnp@gmail.com
