TAHIR AMIN

ISLAMABAD: Pakistan witnessed a significant increase in remittance inflows, 11.3 percent in September against the same month a year ago and a disturbing 55.5 percent decline in foreign direct investment - from USD417.4 million in September 2025 to USD185.6 million in September 2026 - giving a cumulative total foreign investment decline of 64.5 percent last month as opposed to the same month in 2024 - USD446.9 million to (-) USD361.1 million.

This was revealed in the Monthly Economic Update and Outlook October 2025, released by the Finance Division here on Monday.

Inflation is expected to remain in the range of 5-6 percent in October 2025, as flood-related supply disruptions and temporary border closures have put upward pressure on prices of a few essential commodities.

Due to recent floods, there is risk of inflationary pressures. However, the government remains firmly committed to maintaining fiscal discipline, keeping inflation within the target and providing targeted social protection within a sound and forward-looking macroeconomic policy framework.

According to a preliminary assessment the recent flood caused Rs. 430 billion losses in the agriculture sector, damaging crops - rice, cotton, sugarcane, maize, fodder and, vegetables. Nevertheless, recent indicators suggest that recovery efforts are underway supported by increased agricultural credit, higher machinery imports, and improved fertilizer offtake, it added.

The report noted that Large-Scale Manufacturing (LSM) registered a growth of 4.4 percent during Jul-Aug FY2026 with 12 sectors recording positive growth, including wearing apparel, non-metallic mineral products, food, electrical equipment, automobile and tobacco. In August 2025, LSM marginally grew by 0.5 percent on year-onyear (YoY) basis while on month-on-month (MoM) basis it declined by 2.7 percent. CPI inflation recorded at 5.6 percent (YoY) in September 2025 as compared to 3.0 percent in the previous month and 6.9 percent in September 2024. On MoM basis, it increased by 2.0 percent in Sep 2025 as compared to a decrease of 0.6 percent in the previous month and a decrease of 0.5 percent in Sep 2024. During Jul-Sep FY2026, it was recorded at 4.2 percent against 9.2 percent last year.

During July-August fiscal year 2026, net federal revenues surged by 231.4 percent to Rs. 3,269.8 billion, compared to Rs. 986.7 billion in the same period last year. This improvement was driven by a 721.1 percent jump in non-tax revenues and a 14.1 percent rise in FBR tax collections. The surge in non-tax revenues was mainly led by higher State Bank of Pakistan profits, supplemented by increased receipts from dividends, defence receipts, Windfall Levy against crude oil, the Gas Infrastructure Development Cess, and the petroleum levy. During July-September fiscal year 2026, FBR’s tax collection rose to Rs. 2,884.4 billion, up 12.5 percent.

On the expenditure side, total outlays increased modestly by 7.6 percent to Rs. 1,760.6 billion, reflecting prudent fiscal management. Consequently, the federal fiscal balance recorded a surplus of Rs. 1,509.2 billion, compared to a deficit of Rs. 648.8 billion last year. The primary balance also improved sharply, posting a surplus of Rs. 2,938.9 billion, up from Rs. 49.4 billion in the corresponding period.

The current account recorded a deficit of $594 million, during July-September fiscal year 2026, compared to $502 million last year. However, in September fiscal year 2026, the current account turned to a surplus of $110 million. Goods exports rose 6.5 percent to $7.9 billion, while imports increased 8.3 percent to $15.4 billion, resulting in a trade deficit of $7.5 billion during July-September fiscal year 2026 compared to $6.8 billion last year.

It further stated that remittances were up 8.4 percent to $9.5 billion during July-September fiscal year 2026, led by inflows from Saudi Arabia (24.2% share) and UAE (20.8%). Net FDI inflows declined, recording at $568.8 million. Main sources remained China ($188.6 million) and Hong Kong ($96.0 million). Sector-wise, power ($244.3 million) and financial services ($180.2 million) attracted the most FDI. Private and public FPI recorded net outflows of $121.5 million and $511.8 million, respectively. As of October 17, 2025, foreign exchange reserves stood at $19.9 billion, including $14.5 billion with SBP.

During the period 01st July–03rd October, FY2026 money supply (M2) showed negative growth of 2.6 percent as compared to negative growth of 1.9 percent last year. Within M2, Net Foreign Assets (NFA) of the banking system increased by Rs. 173.8 billion as compared to an increase of Rs. 188.6 billion last year. Whereas Net Domestic Assets (NDA) of the banking system decreased by Rs. 1245.5 billion as compared to a decrease of Rs. 863.9 billion last year. Under the borrowing for budgetary support, government has retired Rs.2039.6 billion against the retirement of Rs. 1282.0 billion last year. Private sector has retired Rs 18.6 billion as compared to retiring of Rs. 297.0 billion last year. In the capital market, the Pakistan Stock Exchange (PSX) continued its bullish momentum in September 2025, with the KSE-100 Index climbing 16,875 points to close at 165,493. The Market capitalization expanded by Rs.1,608 billion, reaching Rs. 19,264 billion by month-end. As of October 22,2025, the KSE-100 Index stood at 166,553 points, with total market capitalization recorded at Rs. 19,212 billion.

In September 2025, the Bureau of Emigration & Overseas Employment registered 73,545 workers, a 43 percent increase from 51,444 in August 2025. The Pakistan Poverty Alleviation Fund, in partnership with 26 organizations, disbursed 5,370 interest-free loans worth Rs. 322.6 million during September 2025. Since 2019, a total of Rs. 120.7 billion has been provided to the borrowers. During Jul-Aug FY2026, Rs. 14.63 billion was spent under the BISP, representing a 60.0 percent decrease compared to last year.

Continued progress in privatization, digital governance, and CPEC Phase 2.0 joint ventures underscores the government’s commitment to fiscal consolidation, structural transformation, and sustainable, inclusive growth, the report noted.