Pakistan’s economy right now feels like it’s finally catching its breath after a long, bruising few years. Things aren’t perfect, but there’s a real sense that the worst of the storm might be behind us.
The latest World Economic Situation and Prospects 2026 report from the United Nations is actually sounding a bit hopeful about Pakistan —forecasting 3.5% growth for 2026. That number isn’t coming out of thin air; it’s built on the fact that the IMF program is still being followed (even if grudgingly sometimes), economic management has become noticeably more serious, and — perhaps most importantly — we’re starting to see recovery spread across different parts of the economy instead of being limited to just a few bright spots.
The UN experts don’t sugarcoat it though. They describe the mood as “cautiously optimistic” — which is probably the most diplomatic way of saying “things are looking better… but please don’t jinx it.” They give credit where it’s due: recent policy moves and the harder structural reforms have managed to restore at least some trust. People are seeing better control over the budget, the external account isn’t bleeding as badly, and inflation isn’t running completely wild anymore. Still, they’re quick to add the reality check — Pakistan is still quite exposed. Another major flood, a sudden jump in global oil prices, political instability… any of these could knock the wind out of the sails pretty fast.
The most heartening part in the whole report is probably the external account turnaround. After years of living with one chronic current account deficit after another, Pakistan actually posted a surplus in FY25. Imports got disciplined, exports finally showed some life, remittances stayed strong (thank God for the overseas Pakistanis), and the overall macro grip tightened. That one change took an enormous amount of pressure off the rupee and let the State Bank start slowly rebuilding its foreign exchange reserves — something that had looked almost impossible just two years ago.
Fiscal performance has also surprised on the upside. The government actually beat its primary balance target in FY25 — something many people (including some inside the bureaucracy) didn’t expect. Better tax collection, fewer wasteful subsidies, tighter control over spending — all of it added up. None of this was painless. A lot of people felt it in their monthly budgets. But the numbers are starting to show that the bitter medicine is having an effect.
Inflation, which had become absolutely brutal for ordinary families, is no longer in the stratosphere. Food and energy prices still hurt, no question, but the crazy double-digit spikes we saw earlier have cooled off quite a bit. The central bank’s tough stance on interest rates, somewhat steadier supplies, and a less panicked exchange rate have all helped. For the first time in a long while, people can at least plan their expenses without feeling like the ground is shifting under them every month.
And then there’s the early data from this fiscal year that really makes you sit up. In the first quarter of FY26, the economy grew 3.71% — more than double the 1.8% it managed in the same quarter last year. That’s not just a statistical bounce; it’s the first clear sign that momentum might actually be shifting.
Even more encouraging is what’s happening inside factories. Large-scale manufacturing jumped 9.38% in that same quarter — compared to basically zero growth (0.12%) the year before. That’s huge. Better power supply, slightly less crazy input costs, and — perhaps most importantly — businessmen starting to believe the government might actually stick to its plans… all of this seems to have woken the industrial sector from its long sleep. The UN called it a “qualitative change” in the nature of growth — basically saying that this time the growth is coming from real production, not just people consuming more or the government throwing money around temporarily.
That industrial pickup matters a lot for jobs and exports down the road. More factory activity usually means more employment, more local value addition, and — slowly — less dependence on imported stuff. But everyone knows it’s fragile. One serious power breakdown, one sudden policy U-turn, one external shock… and the momentum can disappear very quickly.
The report doesn’t pretend everything is rosy. It repeatedly warns about climate vulnerability — the 2025 floods are still fresh in everyone’s mind. One big disaster can wipe out agricultural output, wreck roads and bridges, drain the budget on emergency relief, and push millions more people into poverty. Without much stronger preparation and resilience, climate change could easily become the single biggest threat to whatever progress is being made.
There’s also no escaping the difficult human cost of the adjustment. Removing energy subsidies, raising taxes, squeezing expenditures — these things hit ordinary households and small businesses hard. Food inflation is still the number one complaint you hear in markets across the country. The UN quietly points out that macroeconomic stability is essential… but so is protecting the most vulnerable people while the tough reforms are being carried out.
Looking ahead, if Pakistan can hold on to the stronger start it’s had in FY26, there’s a realistic chance of building something more durable. But the risks are still everywhere: inflation could flare up again, global interest rates or commodity prices could move against us, and external financing needs remain uncomfortably large.
In the end, the UN’s message feels like a realistic pat on the back: “You’re doing better — genuinely better — than you were. But this is still a very long road, and you’re walking it with a limp. Keep the discipline, protect the poorest, invest in people and resilience, and maybe — just maybe — the next few years could start to feel different.”
That’s probably as close to encouragement as you’re going to get from a UN report these days. And honestly, after the last few years, even cautious optimism feels like progress.