Pakistan's economy may have grown by closer to 3.3% rather than the officially reported 3.7% in fiscal year 2025-26, according to an alternate assessment of major economic sectors that questions some estimates for agriculture, manufacturing and public administration, complicating the government's claim of the strongest GDP expansion in four years.
The Pakistan Bureau of Statistics put economic growth at 3.7% for FY26, while the Annual Plan's sectoral estimates imply growth of about 3.2%. An examination of major subsectors produces an estimate of approximately 3.3%, representing only a marginal improvement over the 3.2% expansion recorded in FY25. The discrepancy matters as the government targets GDP growth of 4% in FY27 and portrays the latest performance as evidence of a broad economic recovery. According to the finance ministry's Economic Update and Outlook for June 2026, real GDP expanded by 3.7%, the highest rate in four years, while the size of the economy reached USD452.1 billion. The ministry attributed the performance to broad-based expansion across agriculture, industry and services despite flood-related disruptions early in the year and volatility in global commodity markets.
Planning Minister Ahsan Iqbal similarly cited the 3.7% figure while launching the Monthly Development Report for July. He said agriculture grew by 2.9%, industry by 3.5% and services by 4.1% in FY26. Yet a closer examination of the larger components of GDP suggests a more complicated picture.
Agriculture is one source of divergence. The Pakistan Economic Survey's estimates for individual major crops range from growth of 6.2% in sugarcane to a contraction of 0.5% in cotton. When the respective crop weights are taken into account, the estimated growth of the major-crops subsector comes to about 3%, substantially above the PBS estimate of 0.7%. Livestock presents the opposite problem. More than 54% of its value added comes from livestock products, with consumption used as an approximation of output. Between 2018-19 and 2024-25, cumulative consumption growth was only 6.2%, implying annual growth of roughly 1%, partly reflecting weak growth in real per-capita income.
With major crops estimated to have expanded by around 3% and livestock by about 2%, the alternate assessment puts overall agricultural growth at approximately 2.4%, below the official estimate of 2.9%. Manufacturing raises still larger questions. The PBS Quantum Index of Manufacturing indicated large-scale manufacturing growth of 6.1% between July 2025 and April 2026, broadly underpinning the growth incorporated into GDP estimates. Three industries accounted for more than 62% of overall large-scale manufacturing growth: sugar, automobiles and petroleum products. Their reported increases were 31.6%, 64.3% and 10%, respectively. The sugar figure is questioned because sugarcane production itself increased by only 6.2%, making a 31.6% increase in sugar output appear difficult to reconcile with the growth of its principal agricultural input. The assessment also suggests that growth in petroleum products may have weakened in recent months because of the Middle East war.
Small-scale manufacturing is another source of doubt. Its reported growth of 8.5% contrasts with Labour Force Survey data showing annual employment growth of 3.3% in recent years, while exports by smaller manufacturers did not perform strongly during FY26. On this basis, the alternate assessment places industrial growth at around 2.1%, considerably below the PBS estimate of 3.5%.
Official data nevertheless point to a pronounced recovery in large-scale industry. Iqbal said LSM expanded by 5.8% during July-May FY26 after contracting by 1.12% in the corresponding period a year earlier. He cited growth of 58.8% in automobiles, 13.5% in electrical equipment, 12.8% in tobacco, 7.8% in food, 7.3% in wearing apparel, 6.3% in non-metallic mineral products and 5.4% in beverages.
The finance ministry's June report presented an even stronger picture for an earlier period, putting LSM growth at 6.4% during July-April, compared with a 1.5% contraction a year earlier.
Services appear less contentious overall, although there are substantial differences within the sector. Wholesale and retail trade expanded by a reported 3.7%, up from just 0.5% in FY25. Given stronger combined agricultural and industrial activity and an almost 8% increase in import volumes, the estimate is considered broadly consistent with underlying activity.
Transport, by contrast, may have grown faster than the officially reported 2.3%. Oil Companies Advisory Council figures showed high-speed diesel sales increasing by 6.1% and motor-spirit consumption by 3.9% between July and April. Overall fuel consumption growth was projected at about 4.3%, suggesting transport activity may have expanded at a similar rate. That possible understatement is counterbalanced by public administration and social security, where the reported growth rate of 8.5% appears high. A substantial share of value added in public administration comes from employee remuneration, including federal defence expenditure, the cost of civil government and pensions, as well as provincial payments to employees. Fiscal-operation data through the third quarter of FY26 showed these expenditures increasing by 12%. With inflation close to 7%, the corresponding real increase is estimated at nearer 5% rather than the reported 8.5%.
The higher alternate estimate for transport and the lower figure for public administration broadly offset one another, leaving overall services growth close to the PBS estimate of 4.1%. Taken together, the alternative calculations point to lower growth than official estimates in livestock, manufacturing and public administration, but stronger performance in major crops and transport. The resulting GDP estimate of about 3.3% sits between the Annual Plan's implied 3.2% and the 3.7% contained in the national income accounts. Whatever the precise rate, the government enters FY27 with a more ambitious target. Iqbal said Pakistan aims for 4% GDP growth while avoiding the fiscal and external imbalances that have accompanied previous periods of expansion.
The government is pointing to several indicators as evidence that conditions have improved. Average inflation was reported at 7.1% in FY26, below the official target of 7.5%. Goods and services exports reached USD40.9 billion, while services exports rose by 18.7% to USD10 billion from USD8.5 billion. Workers' remittances increased by 8.6% to USD41.6 billion from USD38.3 billion, while the current-account deficit was contained at USD139 million despite higher imports and global uncertainty. The government aims to lift exports to USD63 billion by 2029.
Fiscal indicators have also improved in some areas. Iqbal said the Federal Board of Revenue collected Rs13 trillion during FY26, 10.8% more than the Rs11.7 trillion raised a year earlier. The revenue target for FY27 has been set above Rs15.2 trillion. The finance ministry reported a primary surplus of 3.5% of GDP during July-April FY26, supported by expenditure management, revenue mobilisation and provincial surpluses. Net federal revenue rose by 5.8% to Rs8.60 trillion during that period, while total expenditure declined by 9.9% to Rs11.62 trillion, partly because mark-up payments fell by 21.9%.
The government also expects its development programme to support employment. Iqbal said projects approved during FY26 were expected to generate approximately 289,000 direct jobs and 424,000 indirect positions, while financial and economic reviews of schemes produced savings of Rs12.6 billion. But Pakistan's longer-term growth problem extends beyond disagreements over national accounts. One potentially large source of productive capacity remains underused: women.
According to World Bank labour-market estimates cited in the material, only about 24% of Pakistani women aged 15 and above participate in the labour force, compared with around 80% of men. The gap places Pakistan among countries with the widest disparities in economic participation.
The economic consequence is broader than forgone wages. Barriers to women's education, employment, entrepreneurship, finance and leadership can also mean lost productivity, business formation, innovation, tax revenues and returns on investments already made in human capital.
Pakistan has expanded girls' education over recent decades, but the challenge is increasingly to translate those educational gains into employment, entrepreneurship, innovation and leadership.
Policies identified as potentially important include marketable skills, digital inclusion, childcare, safe public transport, healthcare, entrepreneurship and access to finance. In this framing, spending that enables greater participation represents an investment in productive capacity rather than simply a social intervention.
The government is also seeking to address skills more broadly. Iqbal said universities had been directed to review curricula to align higher education with the requirements of the Fourth and Fifth Industrial Revolutions. New degree programmes focusing on future skills are planned alongside stronger professional development for teachers. The immediate test, however, is whether the economy can accelerate from its modest FY26 expansion to the targeted 4% without recreating previous fiscal and external imbalances.
That challenge becomes more demanding if the economy's starting point was nearer 3.3% than 3.7%. The dispute over the precise number does not erase the recovery, but it changes its scale: instead of a pronounced acceleration to a four-year high, FY26 may have delivered little more than a marginal improvement on the previous year's 3.2% growth.