• Expenditures swell 11.9pc against revenue growth of 11.4pc in July-October
• Public debt records first quarterly decline of Rs1.371tr in five years
• Key crops cotton, rice see production fall; sugarcane and chillies rise
ISLAMABAD: With a 256 per cent surge in current account deficit, the government on Friday expressed cautious optimism over the country’s economic outlook with stubborn inflation in 5-6pc range due to pressure on food prices and agriculture production.
In its economic update and outlook for November, the Ministry of Finance (MoF) said the industrial activity continued to strengthen amid implementation of reforms.
However, all major fiscal indicators — FBR collection, non-tax revenue, budget surplus and primary surplus — were down as percentage of GDP. The report showed the tax-to-GDP ratio was slightly lower at 2.96pc in first four months of 2025-26 when compared to 3pc last year. Non-tax revenues were also reported at 2.32pc of GDP against 2.63pc in comparable period.
Fiscal surplus was also down this year at 1.63pc of GDP against 1.65pc last year while primary surplus was reported at 2.7pc this year when compared to 2.8pc last year.
The ministry said the crop outlook showed mixed trend and hoped the ‘adequate input availability and government support measures’ to stabilise supplies as the rabi season progressed.
The current account deficit swelled to $733 million during July-October 2025-26 from $206m recorded last year, showing an increase of 255.8pc, the MoF said but claimed that the current account deficit remained “within the expected range, on the back of steady export growth and strong remittance inflows despite the increase in import demand to meet the production requirements”.
Overall, the economy is projected to maintain its positive momentum, supported by continued structural reforms, digital transition, governance improvements, on the back of ongoing efforts toward fiscal discipline and macroeconomic stabilisation, the report observed.
It said the key indicators were showing improvement as fiscal discipline was maintained through stronger revenue mobilisation and prudent expenditure management. However, the report showed expenditure growth at 11.9pc outpacing revenue growth of 11.4pc.
It said the higher remittances and expanding Large-Scale Manufacturing (LSM) sector and IT exports strengthened the economic outlook. Backed by healthy realisation of State Bank of Pakistan’s profits due to record interest rates, the ministry said the public debt declined by over Rs1.371trillion, marking the first quarterly reduction in more than five years.
“This decline reflects strategic use of surplus funds for early retirement of costly debt, thereby reducing refinancing and rollover risks and strengthening macroeconomic stability,” it noted.
Elaborating the mixed agriculture outlook, the report said the sugarcane production for the current season had been estimated to show an increase of 0.6pc to 84.74 million tonnes from 84.24m tonnes last year despite floods.
On the other hand, cotton output is estimated at 6.85m bales, down 3.3pc from 7.08m bales. Similarly, rice production declined by 3.2pc to 9.41m tonnes from 9.72m tonnes and maize production by 6.7pc to 8.43m tonnes from 9.03m tonnes last year.
However, mung and chillies production increased by 14.9pc and 0.5pc to 150,800 and 114,400 tonnes, respectively, from last year.
During 4MFY26, agricultural credit disbursement increased by 18.6pc to Rs845.3bn from Rs712.8bn last year.
The imports of agricultural machinery and implements increased by 23.5pc to $49.3m during from $39.9m in 4MFY25. The LSM output rose 4.1pc during July-September of the current fiscal year with 15 sectors recording positive growth, including textile, wearing apparel, non-metallic mineral products, food, coke & petroleum products, electrical equipment, automobile and tobacco.
On the positive side, service exports grew by 15.9pc to $3bn compared to 12pc import growth to $4.2bn, with a service trade deficit of $1.2bn against $1.1bn. IT exports were up by 19.6pc to $1.4bn.
The report confirmed that during the first quarter of FY26, net federal revenues increased by 2.4pc to Rs4.117tr compared to Rs4.019tr last year. However, the FBR’s collection rose 11.4pc to Rs3.835tr during 4MFY26. On the expenditure side, total outlays increased by 11.9pc during July-September to Rs2.779tr. Consequently, the federal fiscal balance recorded a second time surplus of Rs1.338tr, compared to a surplus of Rs1.536tr. The primary balance also improved in absolute terms, posting a surplus of Rs3.497tr, up from Rs3.202tr in the corresponding period.
Merchandise exports increased by 2pc ($10.6bn) in first four months but were overwhelmingly outpaced by 9.6pc growth in imports ($20.7bn), resulting in a $10.1bn trade deficit, compared to $8.5bn last year, showing a 19pc surge.
Remittances increased by 9.3pc to $13bn, led by inflows from Saudi Arabia (24.2pc share) and the United Arab Emirates (20.7pc). Net FDI inflows declined by 26pc to $747.7m in first four months led by $226.7m from China and $120m from Hong Kong.
Published in Dawn, November 29th, 2025
