Pakistan’s economy grew by 3.7% in FY2025–26, falling short of earlier expectations of crossing the 4% mark, Finance Minister Muhammad Aurangzeb said on Thursday.

He said growth was affected by global uncertainty, including tensions in the Middle East and disruptions from new US tariff measures, which weighed on international trade and economic sentiment.

Despite missing the higher target, the minister said Pakistan’s economy remained stable and delivered an overall stronger performance compared to a challenging global environment.

The size of the economy expanded to $452.1 billion, while per capita income increased from $1,751 to $1,901.

On the sectoral side, cement production rose 10%, fertiliser output increased 17%, and petroleum activity grew 5%. The services sector expanded by 4.9%, while 16 out of 22 manufacturing industries recorded growth, reflecting broad-based recovery.

External accounts also improved, with a current account surplus of $72 million during July–March FY26. Remittances reached a record $33.9 billion, while IT exports rose to $3.8 billion.

Inflation eased compared to previous years, averaging 6.7% during July–May, while tax revenues from FBR increased by 10.1%.

Foreign exchange reserves stood at about $17.1 billion, with expectations of reaching $18 billion by the end of June. Import cover improved to 2.75 months.

Fiscal indicators strengthened further, with the deficit contained at 0.7% of GDP and a primary surplus of 3.2%.

The government also reported growth in private credit, capital market activity, and digital economy inflows, alongside ongoing reforms in privatisation and public sector restructuring aimed at improving long-term efficiency.