Economic outlook report shows strength despite flood risks to food supply

ISLAMABAD: The Ministry of Finance has released its monthly economic outlook report, which shows encouraging signs of economic stability and growth. However, the ministry has also warned that recent devastating floods could pose risks to the country’s food supply.

Also read: Pakistan’s economic recovery hinges on sustained reforms, disaster resilience: ADB

The report notes that inflation is expected to remain in the range of 3.5 to 4.5 per cent in the coming months. In July 2025, inflation was recorded at 3.0 per cent, significantly lower than the same period last year, primarily due to a decline in the prices of food, beverages, clothing, and footwear.

Despite the inflation slowdown, the Ministry cautioned that the recent floods could impact agricultural output and food availability, which may place upward pressure on prices in the coming months.

Encouragingly, the production of major industries increased by 9 per cent year-on-year in July, with substantial gains reported in key sectors including textiles, automobiles, cement, and pharmaceuticals. Notably, vehicle production surged by 50 to 100 percent, and cement dispatches rose by 20.9 per cent, reaching 7.847 million tons from July to August.

Exports also showed positive momentum. During the July-August period, exports increased by 10.2 percent, reaching $5.3 billion, while imports grew by 8.8 per cent, totaling $10.4 billion.

In the agriculture sector, there was a 19.5 per cent increase in agricultural credit, and imports of fertilizer and machinery saw significant growth, reflecting increased investment in productivity.

Spending in education and health sectors also rose, aligning with the government’s broader reform agenda. The Ministry added that alongside these economic indicators, a comprehensive reform process remains underway to ensure long-term sustainability.

“The economy is moving towards stability and growth, and the fiscal deficit is under control,” the report stated, underlining the government’s commitment to maintaining economic discipline amid external and internal challenges.

Also read: ADB announces $3 million emergency aid for flood-hit Pakistan

The Ministry concluded with a cautious but optimistic outlook, reiterating that while macroeconomic indicators are trending positively, climate-related risks such as floods require urgent attention and proactive policy response to safeguard food security and inflation targets.