Economy Shows Stability With Moderated Inflation, Rising Manufacturing

Despite disruptions caused by severe floods since July 2025, the country’s economy maintained its trajectory of stabilization and growth during the first two months of the current fiscal year, supported by moderating inflation, strong large-scale manufacturing (LSM), improved fiscal discipline, the finance ministry reported here Tuesday

ISLAMABAD, (UrduPoint / Pakistan Point News - 30th Sep, 2025) Despite disruptions caused by severe floods since July 2025, the country’s economy maintained its trajectory of stabilization and growth during the first two months of the current fiscal year, supported by moderating inflation, strong large-scale manufacturing (LSM), improved fiscal discipline, the finance ministry reported here Tuesday.

According to the “Monthly Economic Update and Outlook” for September 2025 issued by the Finance Division on Tuesday, industrial momentum strengthened with the LSM sector posting 9 percent year-on-year growth in July, led by textiles, automobiles, and cement. Cement dispatches rose over 20 percent, while automobile production recorded sharp gains across vehicles.

Inflationary pressures eased considerably, with Consumer Price Index (CPI) inflation dropping to 3.0 percent in August compared to 9.6 percent a year earlier. On a cumulative basis, inflation stood at 3.5 percent during July–August FY2026, down from 10.4 percent in the same period last year.

Fiscal accounts reflected resilience, with revenue mobilization and expenditure discipline helping to contain the deficit at 0.2 percent of GDP and yielding a primary surplus of Rs.

228.9 billion. Federal Board of Revenue’s collection rose 14.1 percent to Rs. 1.66 trillion during the period.

The external sector remained broadly stable. Exports increased 10.2 percent to $5.3 billion, while remittances climbed 7 percent to $6.4 billion.

Foreign exchange reserves reached $19.8 billion by September 19, 2025, including $14.4 billion with the State Bank of Pakistan. The Pakistan Stock Exchange also sustained its bullish run, with the KSE-100 Index closing at 148,617 points in August, reflecting investor confidence.

Looking ahead, the report projected a stable macroeconomic outlook, underpinned by industrial recovery, steady remittances, and easing global commodity prices. However, it cautioned that flood-related disruptions could create temporary pressure on food supplies and push inflation slightly higher, though it is expected to remain contained within 3.5–4.5 percent in September 2025.

At the global level, Fitch Ratings forecast growth at 2.4 percent for 2025, with improving demand in Pakistan’s main export markets, such as the US, China, and the Eurozone expected to support the country’s external account going forward.