FY27 economic outlook brightens, but SBP warns of global storms ahead

Pakistan's macroeconomic outlook for FY27 has improved relative to the MPC’s earlier assessment immediately following the outbreak of the Middle East conflict, according to the Monetary Policy Report – August 2026 released by the State Bank of Pakistan (SBP). Inflation is projected to be lower than previously anticipated; economic activity is expected to recover gradually; and the external account pressures are assessed to remain moderate, with SBP’s FX reserves targeted to increase further. The continued implementation of prudent monetary and fiscal policies has improved the economy's resilience to shocks relative to previous years. Nonetheless, the baseline outlook remains subject to multiple evolving short- and medium-term risks, emanating from both external and domestic sources.