Finance Ministry Report: Inflation likely to remain at 10 percent in July, major decline in foreign investment

In its new monthly economic report, the Ministry of Finance predicted the country’s inflation rate will be in the range of 9 to 10 percent for July 2026. According to the report, ongoing global geopolitical tensions, especially the increasing tension between the US and Iran, may affect global energy prices and financial markets, which is likely to have an impact on other import economies including Pakistan.

According to the report, Pakistan welcomed foreign direct investment (FDI) of $339 million during financial year 2025-26, marking a 33.9 percent drop compared to the previous year. Investment volume fell to $1.636 billion in the last financial year from $2.477 billion in the previous financial year, suggesting that investors were playing things safe.

The total amount of foreign investment in the financial year was $3.6 million, according to the Ministry of Finance. On the other hand, the country’s exports remained limited to $30.8 billion after a 4.6 percent decline, however, there was an increase in remittances sent by Pakistanis living abroad. According to the report, remittances reached $41.6 billion, which is 8.6 percent more than the previous financial year and is considered a positive development for the external accounts.

As of July 17, the total foreign exchange reserves in the country were $22.7 billion and $17.3 billion were held by the State Bank of Pakistan, the report said. These reserves can be significant factors in alleviating payment pressures from outside the company.

The June 2026 inflation rate fell to 11.1 percent from 11.7 percent in May, the ministry of finance said, based on the trend in the inflation rate. Likewise, the average inflation for financial year 2025-26 is 7.1 percent and the pace of inflation is little lower now than it was before.

A conservative evaluation of the agriculture industry is also included in the report. Water availability for Kharif crops could be compromised in the event of continued below normal rains, the Ministry of Finance said, adding there would be a negative impact on the Kharif crop production of cotton, rice, sugarcane and maize.

During July-May, the output of major industries saw 5.8 percent growth, the report on economic activities said while during the same period the Federal Board of Revenue (FBR) collected taxes worth Rs13.01 trillion, which was 10.8 percent higher than in the previous fiscal year. These were the improvements in the industrial sector and revenues.

The fiscal deficit between July and the end of May stayed moderate at 1.6 percent of gross domestic product (GDP), the report said. While many economic indicators are showing signs of stabilization, the world’s overall economic uncertainty, geopolitical tensions, possibility of changes in energy prices and climate risks, could also be a great challenge for the economy of Pakistan during the coming few months, said Ministry of Finance. The government remains optimistic that these efforts will be continued to ensure economic stability and maintains a close watch on them.