Pakistan’s Ministry of Finance has released its latest monthly economic outlook, highlighting a significant decline in foreign direct investment (FDI) during the fiscal year 2025-26. The report also warns that rising international oil prices may increase inflationary pressure in the country over the coming months.
According to the ministry, inflation during July 2026 is expected to remain between 9% and 10%. The report notes that ongoing geopolitical tensions involving the United States and Iran continue to create uncertainty in global energy markets, which could directly impact fuel prices and domestic inflation in Pakistan.
The economic outlook reveals that Pakistan’s foreign direct investment dropped by 33.9% during FY2025-26. Total FDI declined from $2.477 billion in the previous fiscal year to $1.636 billion, reflecting weaker foreign investor confidence despite ongoing economic reforms.
In June 2026 alone, Pakistan attracted only $13.5 million in foreign direct investment. However, total foreign investment during the fiscal year reached $3.6 billion. The report suggests that improving investor confidence remains essential for sustaining long-term economic growth.
Pakistan Inflation Expected to Stay High in Early FY 2026-27: Finance Ministry Report
Pakistan’s exports also recorded a decline during FY2025-26. Export earnings fell by 4.6% to $30.8 billion. In contrast, workers’ remittances continued to strengthen the economy, reaching $41.6 billion, an annual increase of 8.6%, providing valuable support to the country’s external finances.
The report states that Pakistan’s total foreign exchange reserves stood at $22.7 billion as of July 17, while the State Bank of Pakistan held $17.3 billion. Meanwhile, the Federal Board of Revenue collected Rs13.01 trillion in taxes during FY2025-26, representing a 10.8% increase compared to the previous year. Fiscal deficit from July to May remained limited to 1.6% of GDP, indicating relatively controlled government finances.
The Finance Ministry also expressed concern over below-average rainfall, warning that water shortages could affect Kharif crops, including cotton, rice, sugarcane, and maize. Despite these agricultural risks, Pakistan’s large-scale manufacturing sector posted 5.8% growth during July to May, reflecting continued industrial recovery amid broader economic challenges.
