ISLAMABAD – The Finance Ministry has projected that inflation in August 2025 will remain between 4 and 5 percent. The ministry, however, warned that ongoing flood-related damages could put extra pressure on the economy and disrupt food supplies in affected areas.
The latest Monthly Economic Update and Outlook noted that Pakistan entered Fiscal Year 2025-26 with positive momentum. Stronger external balances, improved fiscal management, and reforms to encourage investment have helped create stability. Officials said these developments have set a promising tone for the months ahead.
The report highlighted that government measures such as tariff rationalization, investment facilitation, and support for private sector-led growth are expected to boost business confidence. A favorable global environment and increased demand from trading partners are also likely to support exports. In addition, remittances from overseas workers are expected to ease trade deficit pressures.
Despite these positive indicators, the ministry cautioned that floods may lead to food supply disruptions and fiscal challenges. Still, the Pakistan August inflation projection remains moderate, with inflationary expectations seen as well-anchored.
According to official data, headline inflation was recorded at 4.1 percent in July 2025, compared to 3.2 percent in June and 11.1 percent in July 2024. On a month-to-month basis, inflation rose by 2.9 percent in July after a small 0.2 percent increase in June.
The economic update also pointed to improvements in the external sector, with a narrower current account deficit and a stable exchange rate. Tax collection by the Federal Board of Revenue (FBR) showed strong growth, while agricultural credit and machinery imports rose significantly.
Pakistan’s fiscal indicators also improved. The fiscal deficit narrowed to 5.4 percent of GDP in FY2025, the lowest in eight years, while the primary surplus reached its highest level in 24 years. International credit rating agencies recently upgraded Pakistan’s outlook, reflecting confidence in ongoing reforms and fiscal discipline.
The Finance Ministry concluded that while risks from floods remain, the economy is starting the new fiscal year on a stronger footing, supported by prudent policies and structural reforms.
