Business Recorder
The State Bank of Pakistan (SBP) has projected continued moderation in the domestic economic activities in the fourth quarter (April-June) of the current fiscal year 2025-26, limiting the growth prospects at around 3.75% in the year ending June 30, 2026, according to the bank’s latest monetary policy statement (MPS) issued on Monday. Earlier, the bank had revised up its growth projection by 50 basis points to be in the range of 3.75-4.75% in January 2026 from the earlier forecast of 3.25-4.25% for FY26 in July 2025. At the post-monetary policy’s analysts briefing in the day, SBP Governor Jameel Ahmad was quoted by Topline Securities saying the central bank had revised down projection for inflows of workers’ remittances by $1 billion to $41 billion in FY26. Also read: Inflation in Pakistan clocks in at 7.3% in March 2026 Despite the projected slowdown in the flows, the bank kept its previous estimation intact for buildup in foreign exchange reserves at $18 billion by the end of FY26 compared to $15.8 as on April 24, 2026. The monetary policy committee (MPC), in its latest statement, assessed “the current supply shock may push inflation to double digits in the coming months before it starts to ease subsequently. However, inflation is expected to stay above the upper bound of the target range of 5-7% for most of FY27”. Taking cue from the worsening inflation outlook, the central bank increased the policy rate by 100 basis points to 11.5% on Monday – the first hike in the rate in the past three years. The impact of the Middle East conflict will be visible in key economic indicators going forward. “The moderation in economic activity is likely to continue in FY27, though the outlook is subject to multiple risks, including the duration and intensity of the ongoing conflict,” the MPS read. The statement said the ongoing Middle East conflict was expected to spillover on industrial and services sector activities in the fourth quarter (April-June FY26). “[This] is expected to result in real GDP [gross domestic product] growth for FY26 turning out closer to the lower bound [3.75%] of the earlier projected range [3.75-4.75% for FY26]. The moderation in economic activity is likely to continue in FY27, though the outlook is subject to multiple risks, including the duration and intensity of the ongoing conflict,” it said. “High-frequency industrial and services sector indicators, which had been showing strong momentum in economic activity till February, showed some signs of moderation in March. In agriculture, growth prospects have moderated slightly, driven mainly by lower than anticipated wheat production as per the first estimates reported by the Federal Committee on Agriculture. “The real GDP grew by 3.8% in the first half of FY26 as compared to 1.9% in the same period last year.” The fiscal deficit remained contained till March. However, the ongoing Middle East conflict has made fiscal management more challenging. The pass-through of higher international oil prices to domestic consumers necessitated support for vulnerable groups through targeted subsidies. To achieve the targeted full-year primary surplus, “a larger cut in expenditures may be required”, the central bank said.
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