The National Accounts Committee (NAC) wrapped up its meeting earlier this week and emerged with a set of numbers that, at first glance, look encouraging.
According to the committee, Pakistan’s economy grew by 3.71% in the first quarter of FY2025–26 (July–September 2025). At the same time, the NAC revised upward the growth estimate for the final quarter of FY25 to 6.17%, nudging full-year GDP growth for FY25 to around 3.09%, up from the earlier estimate of 3.04%.
Planning Minister Ahsan Iqbal was quick to hail the figures on social media, framing them as evidence of resilience in the face of floods, subsidy rollbacks, fiscal tightening, and broader global headwinds.
On the surface, the data does beat expectations. After two difficult years marked by balance-of-payments stress, inflation, and tight monetary conditions, a pickup in growth — particularly one led by industry — naturally sounds like good news. But for those who have followed Pakistan’s national accounts over time, these releases also trigger a familiar sense of caution. There is a long-standing perception, especially under PML-N governments, that headline growth numbers sometimes appear more optimistic than what ground realities seem to support.
We’ve seen similar episodes before. At times, flood damage estimates balloon when the country needs external assistance or IMF flexibility, only to be quietly revised later. At other moments, sectoral growth numbers feel unusually generous just when a positive narrative is politically convenient. That doesn’t automatically mean the current figures are “wrong,” but it does mean they deserve closer scrutiny — particularly when some components appear to clash with observable market signals.
Starting with agriculture, the NAC reports 2.9% overall growth. That sounds reasonable until you break it down. Major crops declined by 3.7%, with cotton, other crops, and ginning all registering negative growth. Under normal circumstances, such weakness would significantly drag down the sector. Yet agriculture still ends up in positive territory almost entirely because livestock is reported to have grown by a striking 6.3% — one of the highest rates seen for this sub-sector in years.
This is where eyebrows start to rise. Anyone who has been to a meat shop or poultry market recently knows prices have been persistently high. Elevated prices typically reflect supply constraints, rising input costs, or herd pressures — not a sudden surge in output. Rapid livestock growth on paper, alongside tight supplies and expensive protein in real life, feels counter-intuitive. Since livestock data is largely estimated rather than directly measured, assumptions play a big role — and those assumptions can significantly sway headline GDP numbers.
The industrial sector is where the headline momentum really comes from. Industry is reported to have grown by a robust 9.4%, a sharp turnaround from the weak performance in the same quarter last year. There are genuine positives here. Automobile production rebounded, cement dispatches rose by around 15%, and construction activity appears to have picked up — all consistent with easing import restrictions and slightly improved business sentiment.
However, the numbers still raise questions. Large-Scale Manufacturing (LSM) — which dominates industrial output and is tracked monthly by the Pakistan Bureau of Statistics — grew only around 4.1% in Q1. That figure is respectable, but it is less than half of the reported overall industrial growth. The gap is explained by Small-Scale Manufacturing (SSM), which is credited with 10.2% growth — more than double LSM. Historically, LSM and SSM tend to move in broadly similar directions. Such a large divergence is unusual and suggests heavy reliance on estimates rather than hard data.
There is also reported 7.5% growth in slaughtering, which again seems at odds with the earlier livestock discussion and with conditions in meat markets. When multiple sub-components point in conflicting directions, it weakens confidence in the aggregate figure.
The most dramatic contributor, however, is electricity, gas, and water supply, which is shown to have surged by around 25.5%. This follows an even more extraordinary jump of over 100% in the previous quarter. Yet actual electricity consumption rose by only about 1%, hardly a sign of explosive economic activity. The explanation lies largely in accounting mechanics. Government subsidies to the power sector reportedly jumped from roughly Rs20 billion to Rs118 billion, plugging losses and addressing circular debt. In national accounts, these subsidies are recorded as value added, inflating measured output even though physical production and demand barely changed.
This is technically correct under the accounting framework, but economically misleading. It boosts GDP without reflecting real productivity gains, investment, or job creation — and risks overstating the health of the economy.
Construction growth of 21% appears more credible, backed by cement data and housing-related activity. The services sector, growing at 2.35%, also feels realistic, with wholesale and retail trade expanding by about 3.1%. Still, double-digit growth in finance and insurance stands out and would benefit from clearer explanation, especially in an environment of high interest rates and weak private credit growth.
Looking at GDP from the expenditure side, the picture is less flattering. Growth appears to be driven overwhelmingly by consumption, contributing more than 100% of overall expansion, while investment remains weak and net exports continue to subtract from growth. That is not a healthy mix. Consumption-led growth, especially when fueled by subsidies and government support, does little to improve long-term capacity, exports, or employment prospects.
Overall, the economy does appear to be recovering — but slowly, unevenly, and with significant structural constraints. High energy costs, heavy debt servicing, limited export diversification, and weak investment remain binding challenges. When growth figures rely heavily on subsidies, small-scale estimates, and optimistic assumptions about livestock, it risks undermining credibility.
Overstating growth may offer short-term political comfort, but it can also breed policy complacency, delay tough reforms, and complicate future negotiations with lenders such as the IMF. For Pakistan, a credible and sustainable 3–4% growth path would already be a meaningful achievement given current constraints. But it needs to rest on solid foundations: affordable energy, real productivity gains, rising investment, and export momentum — not just clever accounting.
If the government sticks to transparent, believable numbers, it keeps policymakers honest and focused on the real work ahead. Here’s hoping the rest of FY26 delivers progress that Pakistanis can actually see and feel — not just read about in headline GDP figures.