Inflation likely to stay within 5-6pc range
TAHIR AMIN
ISLAMABAD: Amid decline in production of major crops including cotton and rice, inflation is expected to remain in the range of 5–6 percent in November, driven by pressures on food prices and agricultural output.
This was stated by the Finance Division in its ‘Monthly Economic Update and Outlook November 2025’ released on Friday. It further noted that Foreign Direct Investment (FDI) into the country declined sharply by 26 percent in the first four months (July-October) of fiscal year 2026, compared to the same period last year.
FDI totaled USD747.7 million during July–October fiscal year 2026, down from USD1.01 billion in the corresponding period of fiscal year 2025.The decline came despite a strong monthly performance in October2025 FDI when it rose to USD178.9 million against USD145.9 million in October 2024 – a rise of 22.6 percent. Main sources of inflow were China (USD226.7 million) and Hong Kong (USD120.1 million). Sector-wise, power (USD297.0 million) and financial services (USD259.8 million) attracted the most FDI.
Total foreign investment dropped substantially to USD209.2 million in July–October 2026, down from USD1.196 billion a year earlier. Portfolio investment swung back into negative territory at –USD538.5 million, compared with a positive USD185.7 million in the same period last year. During October it increased by 37.4 percent to USD273.7 million, when compared to USD199.2 million during the same month of last year.
As of November 14, 2025, foreign exchange reserves stood at USD14.5 billion with State Bank of Pakistan.
Remittances continued to provide crucial support, rising by 9.3 percent year-on-year to USD12.955 billion in the July–October period, led by inflows from Saudi Arabia (24.2 percent share) and UAE (20.7 percent). Monthly inflows for October reached USD3.418 billion, up 11.9 percent when compared to USD3.054 billion during the same month of last year.
The report noted that public debt has declined by over Rs?1,371?billion, marking the first quarterly reduction in more than five years. This decline reflects strategic use of surplus funds for early retirement of costly debt, thereby reducing refinancing and rollover risks and strengthening macroeconomic stability, it added.
The report noted that sugarcane production estimates for the year 2025-26 witnessed an increase of 0.6 percent to 84.74 million tons from 84.24 million tons last year despite floods. Cotton output is estimated at 6.85 million bales, down 3.3 percent from 7.08 million bales. Rice production declined by 3.2 percent to 9.41 million tons from 9.72 million tons and maize production by 6.7 percent to 8.43 million tons from 9.03 million tons last year. However, moong and chillies production increased by 14.9 and 0.5 percent to 150.8 and 114.4 thousand tons, respectively, from last year.
The Federal Committee on Agriculture (FCA) has fixed wheat production target for Rabi 2025-26 at 29.68 million tons from an area of 9.65 million hectares based on satisfactory input situation.
During July-October fiscal year 2026, agricultural credit disbursement jumped by 18.6 percent to Rs. 845.3 billion from Rs. 712.8 billion last year. The imports of agricultural machinery & implements increased by 23.5 percent to USD49.3 million during July-October 2026 from USD39.9 million last year.
Large-Scale Manufacturing (LSM) registered a growth of 4.1 percent during July-September 2026 with 15 sectors recording positive growth. In September 2025, LSM grew by 2.7 percent on YoY basis and by 2.1 percent on a month-on-month (MoM) basis.
Consumer Price Index (CPI) inflation recorded at 6.2 percent on YoY basis in October 2025 as compared to 5.6 percent in the previous month and 7.2 percent in October 2024. On MoM basis, it increased by 1.8 percent as compared to 2.0 percent in the previous month and 1.2 percent in October 2024.
During July-September 2026, net federal revenues increased by 2.4 percent to Rs. 4,117.5 billion, compared to Rs. 4019.5 billion last year. During July-October 2026, Federal Board of Revenue (FBR)’s tax collection rose to Rs. 3,834.9 billion, up by 11.4 percent.
On the expenditure side, total outlays increased by 11.9 percent during July-September 2026 to Rs. 2,779.3 billion. Consequently, the federal fiscal balance recorded a second time surplus of Rs. 1,338.2 billion, compared to a surplus of Rs. 1,536.3 billion last year. The primary balance also improved, posting a surplus of Rs. 3,497.3 billion, up from Rs. 3,202.4 billion in the corresponding period.
The current account posted a deficit of USD733 million during July-October 2026, increasing from a deficit of USD206 million recorded last year. October alone saw a USD112 million deficit. The current account had posted a surplus of USD1.93 billion in fiscal year 2025.
Credit flow to the private sector registered Rs (-54.9 billion) during 1st July to 7th November 2026 against Rs 878.7 billion during 1st July to 8th November fiscal year 2025.
Goods exports rose by 2.0 percent to USD10.6 billion, while imports increased by 9.6 percent to USD20.7 billion, resulting in a trade deficit of USD10.1 billion compared to USD8.5 billion last year. October exports slipped 8.6 percent, adding pressure on the trade balance, as imports surged 13.5 percent in the same month.
The Monetary Policy Committee (MPC) maintained policy rate at 11.0 percent, unchanged since June 2025. The committee adopted a cautious approach to support price stability. Economic performance has improved on the basis of favorable high frequency indicators and lower than anticipated floods impacts. Supply disruptions emanated from floods are expected to further ease out in coming months. However, the decision incorporated risk factors around the outlook arising from volatile global commodity prices, export prospects amidst the evolving tariff dynamics and potential domestic food supply frictions.
During 1st July - 31st October, 2026 money supply (M2) showed negative growth of 1.0 percent compared to negative growth of 1.7 percent in last year. Within M2, Net Foreign Assets of the banking system increased by Rs. 204.5 billion as compared to an increase of Rs. 324.2 billion last year.
Net Domestic Assets of the banking system decreased by Rs. 605.0 billion as compared to a decrease of Rs. 914.6 billion last year. Under the borrowing for budgetary support, the government has retired Rs. 1078.4 billion against the retirement of Rs. 1432.4 billion last year.
The private sector borrowed Rs. 66.1 billion (July-October 2025) as compared to borrowing of Rs. 806.3 billion in the same period last year. In October 2025, the Pakistan Stock Exchange (PSX) remained bearish, with the KSE-100 Index declining by 3,862 points to close at 161,631. By month-end market capitalization contracted by Rs. 702 billion, to reach Rs. 18,561 billion.
In October 2025, the Bureau of Emigration & Overseas Employment registered 90,339 workers, a 22.8 percent increase from 73,545 in September, 2025. As a result, the total registrations reached 278,613, during July–October 2026.
The Pakistan Poverty Alleviation Fund, in partnership with 26 organizations, disbursed 7,459 interest-free loans worth Rs. 456.9 million during the October 2025. Since 2019, a total of Rs. 121.1 billion have been provided to the borrowers.
During July-September 2026, an amount of Rs. 143.3 billion was spent under the BISP, representing a 43.3 percent increase compared to last year.
The report noted that economic outlook remains cautiously optimistic, as industrial activity continues to strengthen amid implementation of economic reforms. While the crop outlook is mixed, adequate input availability and government support measures are expected to stabilize supplies as the Rabi season progresses.
The current account deficit remains within the expected range, on the back of steady export growth and strong remittance inflows despite the increase in import demand to meet the production requirements.
Overall, the economy is projected to maintain its positive momentum, supported by continued structural reforms, digital transition, governance improvements, on the back of ongoing efforts toward fiscal discipline and macroeconomic stabilization, the Update and Outlook added.
