ADB’s report on Pakistan’s economy, growth rate likely to remain at 3.7%

The Asian Development Bank, in its latest report on Pakistan’s economy, has pointed to the improvement in economic activities and said that the continuation of reforms and stability in the external sector can play an important role in the coming period.

According to the ADB, Pakistan’s economic growth rate increased to 3.7% in fiscal year 2026 compared to 3.2% in fiscal year 2025. The bank has also estimated the growth rate to be 3.7% for fiscal year 2027.

The report said that the economic recovery in the last fiscal year was not limited to any one sector. Activity in services and manufacturing increased, while the agriculture sector also contributed to the overall performance.

Despite the effects of the floods, the agriculture sector recorded a growth of 2.9 percent. On the other hand, private investment also increased significantly due to the decline in interest rates and improvement in business confidence.

According to ADB data, private investment grew by 8.6 percent in fiscal year 2026. According to the report, this development is an important sign of improvement in economic activity.

There were also some positive developments on the external front of the economy. Pakistan’s total foreign exchange reserves increased during the fiscal year, which improved its ability to cope with external payment pressures.

Pakistan regained access to global capital markets by issuing Eurobonds and Panda bonds in April and May 2026. ADB also described the improvement in the sovereign credit rating as an important development for investor confidence.

However, the report also draws attention to rising inflationary pressures. In the fiscal year 2026, the average inflation rate was 7.1 percent, compared to 4.5 percent a year earlier.

The ADB has projected average inflation to be 8.3 percent in the fiscal year 2027. Energy prices, import costs and external conditions could be key factors driving price increases.

The ongoing tensions in the Middle East could also impact Pakistan’s economic outlook. If the conflict intensifies, rising global energy prices could impact both Pakistan’s import bill and inflation.

If economic activity in the Gulf countries is affected, there is a risk that remittances coming to Pakistan will also come under pressure. This aspect is of particular importance for Pakistan’s external fiscal position.

The ADB has also listed tightening global financial conditions, potential decline in tax collections, agricultural losses due to climate change and slow pace of energy sector reforms as risks to the economy.

According to the report, progress has been made in strengthening the foundation of economic stability over the past two years, but continued implementation of reforms will be necessary to maintain this momentum.

ADB says that a focus on promoting private investment, along with fiscal and external stability, will remain critical for Pakistan’s long-term economic growth. In the current environment, policy continuity and the pace of reform will be key factors influencing performance in the coming fiscal year.

Overall, ADB’s latest assessment expects Pakistan’s economic growth rate to remain stable, but inflation, energy costs, regional conditions, and global financial conditions are factors that cannot be ignored in the upcoming economic outlook.