ADB projects 3.7pc growth for Pakistan in FY2027

The Asian Development Bank (ADB) has released its latest economic outlook report, saying Pakistan’s economic prospects have improved on the back of continued reforms and timely external financing.

According to the report, Pakistan’s economic performance strengthened further in fiscal year 2026, with economic growth rising from 3.2 per cent to 3.7 per cent.

The ADB attributed the growth to a recovery in services, manufacturing and agriculture, along with increased private investment. However, economic activity slowed in the final quarter due to the conflict in the Middle East.

The bank has projected Pakistan’s economic growth at 3.7 per cent for fiscal year 2027.

The report said continued reforms, stronger external buffers and improved access to capital markets would help restore investor confidence.

ADB Country Director Emma Fan said macroeconomic stability had strengthened over the past two years, with improvements in growth, external financing and market confidence. She described recent credit-rating upgrades as a result of the reform process.

The ADB stressed that maintaining the pace of reforms would be essential to attract private investment and strengthen the economy’s resilience to external shocks.

Manufacturing and services were the main drivers of growth in fiscal year 2026, while agriculture recorded growth of 2.9 per cent despite flooding.

Private investment increased by 8.6 per cent, supported by lower interest rates and improved business confidence.

The report said fiscal stability continued in Pakistan and foreign exchange reserves increased. Pakistan’s sovereign credit ratings were upgraded by S&P in July and Moody’s in August.

The ADB said Pakistan also regained access to international capital markets through Eurobond and Panda bond issuances in April and May.

Meanwhile, inflation increased by 2.6 percentage points during the year, with average inflation rising to 7.1 per cent from 4.5 per cent a year earlier.

The report said inflationary pressures intensified in the second half of the previous fiscal year due to higher food and oil prices. Inflation is projected to reach 8.3 per cent in fiscal year 2027, above the State Bank of Pakistan’s target range of 5 to 7 per cent.

The ADB warned that an escalation in the Middle East conflict could further increase the cost of energy imports. Higher inflation and weaker remittances from Gulf countries could also affect Pakistan’s economy.

The bank added that the government’s austerity measures could weaken domestic demand, while tighter global financial conditions and lower tax revenues pose risks to economic growth.

Other risks identified in the report include natural disasters, increasingly severe climate change and delays in reforms in the energy sector and state-owned enterprises.