The State Bank of Pakistan has published its Half-Year Report FY26 on the state of the economy, concluding that Pakistan’s macroeconomic stability strengthened further in the first half of FY26 despite global trade uncertainty and domestic floods. The report points to lower inflation, stronger external buffers, a fiscal surplus and faster real GDP growth, while warning that the Middle East war creates significant risks for inflation, external trade, remittance flows and overall economic activity. Average National CPI inflation eased to 5.2 percent in H1-FY26, around 2 percentage points below the same period a year earlier. Real GDP grew at twice the pace of H1-FY25, led mainly by stronger industrial activity and supported by services and agriculture. SBP’s foreign exchange purchases and net financial inflows helped build external buffers, while rising workers’ remittances financed a major share of deficits in trade, services and primary income even as rice exports fell and imports rose on stronger volumes. The fiscal balance moved into surplus in H1-FY26 for the first time since FY02, supported by lower interest payments and fiscal consolidation, while the primary surplus stayed at last year’s level. On the outlook, the report says high-frequency indicators such as the Purchasing Managers’ Index, large-scale manufacturing and construction showed momentum through February 2026, before the war began to weigh on output in the remaining month of FY26. SBP now projects FY26 real GDP growth near the lower bound of its earlier 3.75 to 4.75 percent range and expects the current account deficit to be close to the lower bound of its earlier 0 to 1 percent of GDP range. It also expects higher international oil and other commodity prices to keep National CPI inflation above the upper bound of the medium-term 5 to 7 percent target range for most of FY27. The report also includes a special chapter on climate change, highlighting Pakistan’s high vulnerability, low preparedness and unmet financing needs for mitigation and adaptation.
State Bank of Pakistan 2026-05-12
State Bank of Pakistan releases half year economic report showing stronger H1 FY26 stability and warning of Middle East war risks to growth and inflation
The State Bank of Pakistan’s Half-Year Report FY26 finds that macroeconomic stability strengthened in H1-FY26, with lower inflation, stronger external buffers, a fiscal surplus and faster real GDP growth, despite global trade uncertainty and domestic floods. It highlights risks from the Middle East war to inflation, external trade, remittances and activity, and now projects FY26 real GDP growth and the current account deficit near the lower bounds of earlier forecasts, with National CPI inflation staying above the medium-term target range for most of FY27. A special chapter on climate change underscores Pakistan’s high vulnerability, low preparedness and unmet financing needs.