Pakistan Economic Insights: First Quarter of Fiscal Year 2025-26

Pakistan’s economy in the first quarter of fiscal year 2025-26 (July-September 2025) shows signs of regaining, with growth reviewed up to 3.0% for FY25, reinforced by positive commendations from international credit rating agencies (Moody’s, Fitch, S&P) and the successful completion of an IMF review. However, this delicate retrieval faces substantial headwinds from overwhelming monsoon floods, which have harshly impacted agriculture, caused inflationary burdens, and stressed fiscal and external accounts. Crucial encounters comprise an increase in food inflation due to supply disturbances, a broadening trade deficit as imports surge faster than exports, and the fiscal pressure from flood related expenses. Although remittances and the exchange rate remain stable, the external account is under pressure. The manufacturing sector is sluggish, and the growth structure remains excessively dependent on government amenities rather than strong private sector activity. This brief also presents the critical matter of the unsettled National Finance Commission (NFC) Award, arguing that an innovative, data-driven, and multi-tiered fiscal distribution model is vital for impartial growth and stronger fiscal federalism.