C/A deficit weighs on GDP growth

The fragile economic recovery of Pakistan is once again under pressure as the current account deficit widens, undermining growth expectations for the ongoing fiscal year. A new analysis of the Lahore School of Economics (LSE) shows that GDP growth for FY 2025-26 is projected at just 2.4%, the same level as recorded in the previous year, after the current account slipped back into deficit during the first quarter. The report, prepared by the LSE's Modeling Lab and Innovation & Technology Centre, warns that the economy's Achilles heel remains its vulnerability to external shocks. It notes that while Pakistan entered FY26 with optimism due to a current account surplus of nearly $2 billion in the previous fiscal year, the trend reversed quickly.