Pakistan’s central bank sees FY26 growth up to 4.25%, trade gap to widen

This undated file photo shows premises of the State Bank of Pakistan. (Shutterstock/File)
Short Url
Updated 13 August 2025
Follow

Pakistan’s central bank sees FY26 growth up to 4.25%, trade gap to widen

  • Current account deficit forecast at 0–1% of GDP despite remittance growth
  • Forex reserves projected to reach $15.5 billion by end-December 2025

KARACHI: Pakistan’s central bank on Wednesday projected economic growth of up to 4.25 percent in the current fiscal year but warned the trade deficit would widen, even as reserves are set to climb on the back of steady remittances and foreign inflows.

The forecast comes as Pakistan implements reforms under a $7 billion International Monetary Fund (IMF) program approved in September 2024, which has helped stabilize the currency, ease inflation and restore investor confidence. The IMF deal is tied to fiscal consolidation, energy sector reforms, and measures to boost exports, part of a broader effort to strengthen macroeconomic stability after years of chronic external imbalances.

The economy returned to moderate growth last year, aided by improved agricultural output, lower global commodity prices, and a series of policy rate cuts totaling 1,100 basis points since late 2024. Inflation has eased from record highs, while the rupee has stabilized against the dollar after a crackdown on the illegal currency market.

“With the policy rate kept unchanged at 11 percent in the MPC meetings in June and July, the MPC expects the real policy rate to be adequately positive to stabilize inflation within the medium-term target range,” the State Bank of Pakistan (SBP) said in its Monetary Policy Report (MPR) released on Wednesday. 

“In the external account, the MPR expects the trade deficit to widen further and, notwithstanding continued expected growth in workers’ remittances, result in a current account deficit of 0–1 percent of GDP in FY26,” it added.

The central bank said “projected financial inflows, coupled with continued SBP interbank FX purchases, would support further buildup in SBP’s FX reserves, which are projected to rise to $15.5 billion by end-December 2025.”

Economic activity, it said, was “projected to gain further traction, with the impact of the earlier reductions in the policy rate still unfolding,” and real GDP growth was expected to range between 3.25 percent and 4.25 percent in FY26.

The MPR also flagged “potential external and domestic risks to the baseline macroeconomic outlook” and included analysis of the lag in monetary policy transmission, comparisons with global central bank decisions, and the SBP’s use of alternative data and machine learning to fill gaps in labor market and agriculture statistics.
 


Pakistan expands pilgrim travel system for Iran, Iraq with licenses to 67 new operators

Updated 9 sec ago
Follow

Pakistan expands pilgrim travel system for Iran, Iraq with licenses to 67 new operators

  • New system requires all Iraq-Iran pilgrimages to be organized by licensed groups under state oversight
  • Long-running “Salar” model relied on informal caravan leaders, leading to overstays and missing pilgrims

ISLAMABAD: Pakistan has issued registration certificates to 67 additional licensed pilgrimage companies, expanding a tightly regulated travel system designed to curb overstays, undocumented migration and security risks linked to religious travel to Iran and Iraq, the ministry of religious affairs said on Tuesday.

The move is part of a broader overhaul of Pakistan’s pilgrim management framework after authorities confirmed that tens of thousands of Pakistani pilgrims had overstayed or gone missing abroad over the past decade, raising concerns with host governments and triggering diplomatic pressure on Islamabad to tighten oversight.

“The dream of safe travel for pilgrims to Iran and Iraq through better facilities and a transparent mechanism is set to be realized,” the religious affairs ministry said in a statement, quoting Federal Minister for Religious Affairs Sardar Muhammad Yousaf, who announced that 67 new Ziyarat Group Organizers had been registered.

Pakistan’s government has dismantled the decades-old “Salar” system, under which informal caravan leaders arranged pilgrimages with limited state oversight. The model was blamed for weak documentation, poor accountability and widespread overstays, particularly during peak pilgrimage seasons. 

Under the new framework, only licensed companies are allowed to organize pilgrimages, and they are held directly responsible for ensuring pilgrims return within approved timelines.

Authorities say pilgrimages to Iran and Iraq will be conducted exclusively under the new system from January 2026, marking a full transition to regulated travel. The religion ministry said it has now completed registration of 24 operators in the first phase and 67 more in the second, with remaining applicants urged to complete documentation to obtain licenses.

The religious affairs ministry said a digital management system is being developed with the National Information Technology Board to monitor pilgrim movements and operator compliance, while a licensed ferry operator has also secured approval to explore future sea travel options.

The overhaul has been accompanied by tighter coordination with host countries. Earlier this month, Pakistan and Iraq agreed to share verified pilgrim data and restrict entry to travelers cleared under the new system, following talks between interior ministers in Islamabad and Baghdad. Pakistan has also barred overland pilgrim travel for major religious events, citing security risks in its southwestern Balochistan province, meaning travel to Iran and Iraq is now limited to approved air routes.

Officials say the reforms are aimed at balancing facilitation with accountability, as tens of thousands of Pakistani pilgrims travel annually to key Shia shrines, including Karbala and Najaf in Iraq and Mashhad and Qom in Iran. Travel peaks during religious occasions such as Arbaeen, when millions of worshippers converge on Iraq, placing heavy logistical and security demands on regional authorities.

The government says the new system is intended to restore confidence among host countries while ensuring safer, more transparent travel for Pakistani pilgrims.