Key Points
- Finance Ministry releases quarter one reform scorecard
- Foreign exchange reserves hit an all-time high of $21.5 billion
- The current account deficit widened to $874 million
- 15 per cent rise in the trade deficit outpaced export growth
ISLAMABAD: Pakistan has entered the second quarter of fiscal year 2027 with headline numbers its economic managers describe as evidence of a turning point.
The government’s “Emerging Pakistan” scorecard for July–September 2026, the first quarter of the ongoing financial year, paints a picture of strengthening external buffers, surging tax collection, and a privatisation agenda moving from paper to transaction.
Pakistan’s economic challenges
Yet the same quarter produced a widening trade deficit, a larger current account gap, and a manufacturing recovery that remains narrowly concentrated.
The most striking figure is the State Bank of Pakistan’s foreign exchange reserves at $21.5 billion, an all-time high and a 52 per cent year-on-year increase.
The central bank attributes this accumulation largely to foreign exchange purchases rather than fresh external borrowing.
Forward liabilities have fallen to $1 billion from over $5.7 billion, a quiet but significant reduction in hidden external risk.
The scorecard pairs this with $720 million in foreign direct investment, up 20 per cent year-on-year, and a stable “B” category sovereign rating across all three major agencies.
That stability is already under strain. The scorecard reports a current account deficit of $874 million, up from $755 million last year, while describing it as “in line with forecast.”
The trade picture is more mixed than headline export growth suggests: total exports reached $11.2 billion, up 11 per cent, but the trade deficit widened to $10.79 billion as imports of $19.22 billion outpaced export earnings.
Remittances at $10.9 billion, up 14%, rather than a structural shift in trade, have kept the current account in check.
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Revenue tells a similar story of progress with distributional tensions.
The Federal Board of Revenue collected Rs3.1 trillion, up 7% year-on-year, crossed its target, and income tax filers rose 45 per cent to 5.77 million.
But salaried workers paid Rs144 billion in income tax during the quarter, more than the combined Rs54 billion collected from real estate and retail.
Formalisation is reaching beyond the salaried class, yet the burden still falls heavily on those already in the tax net.
Manufacturing grew 1.85 per cent in July–August 2026, led by wearing apparel, automobiles, and petroleum products.
Private sector credit rose 16.6 per cent year-on-year to Rs 11.28 trillion, with housing credit up 71.9 per cent and auto credit up 33.6 per cent.
These are recovery numbers, not boom numbers. A 1.85 per cent expansion is modest for an economy emerging from stabilisation, and growth is concentrated in a few import-dependent and consumer-facing industries rather than broad industrial capacity.
Forward-looking Pakistan
The scorecard’s forward-looking sections are more encouraging.
PIA and First Women Bank transactions are complete, with PIA’s financial closing and management transfer finalised on June 29, 2026.
Power distribution companies, FESCO, GEPCO, and IESCO are at various stages of investor qualification, and Islamabad, Lahore, and Karachi airports have drawn interest from Saudi Arabia, Türkiye, and the UAE.
On the digital side, 92 per cent of retail payments by volume are now digital, and 15,440 companies were incorporated in the quarter, 99.9 per cent of them digitally.
Analysts believe Pakistan government’s scorecard is more a political document than an economic one.
Its choice of indicators emphasises favourable changes; it is less forthcoming on the trade deficit, the current account’s widening, and the narrow base of manufacturing growth.
Pakistan’s stabilisation is not the same as transformation. The quarter’s figures show an economy that has moved away from the brink, not one that has yet changed its growth model.
The next scorecard will need to show whether export growth can outpace import growth, whether LSM can broaden beyond a handful of sectors, and whether the privatisation pipeline produces closed transactions rather than qualified investors.
