Pakistan Economic Insights (January 2026)
Pakistan’s economic recovery is gaining momentum faster than anticipated, with large-scale manufacturing rebounding from contraction to 4.8% growth and agriculture expected to contribute positively. Fiscal consolidation of Rs. 2 trillion was achieved primarily through Rs. 1.6 trillion interest payment savings following rate reductions. However, external pressures are mounting as imports surge while exports contract sharply, widening the trade deficit. Remittances remain the only saving grace. Paradoxically, despite massive social protection spending, poverty incidence has risen to 28.9%, raising serious questions about the effectiveness of social protection programs. The economy shows improvement, but it still faces structural vulnerabilities that require comprehensive reform.
