Aurangzeb: GDP grew 3.7pc in FY26, deficit down to 2.6pc of GDP

Finance Minister Muhammad Aurangzeb told investors in London that Pakistan's economy grew 3.7 percent in FY26 and that the fiscal deficit fell to 2.6 percent of GDP, which he described as a multi-year low. He was speaking at the J.P. Morgan Emerging and Frontier Markets Opportunities Conference.

The country also ran a primary surplus for the third year running, and raised $3 billion through a dual-tranche Eurobond. Fifty-five global funds took one-on-one meetings with the Pakistani delegation.

What 3.7 percent actually buys

Pakistan's population grows at roughly 2.5 percent a year. Growth of 3.7 percent therefore leaves about 1.2 percentage points of income growth per head, before inflation is taken out of it.

And inflation is the problem with this number. CPI inflation was 11.1 percent in August, up from 9.2 percent in July, on our inflation data page. Petrol has moved from the Rs 310 range in mid-July to Rs 389.14 from midnight tonight. A household whose income rose 3.7 percent this year is poorer in what it can buy.

That is the gap between a macro recovery and a felt one. The deficit numbers are real and they are what the IMF programme and the bond market look at. They are not what a salaried household in Lahore or Karachi experiences.

What the minister is selling, and to whom

The audience matters. A J.P. Morgan EM conference is where sovereign issuers court the funds that buy their bonds, and the $3 billion Eurobond is the transaction the pitch is built around. A lower deficit and a third primary surplus are the two numbers that move a country's borrowing cost.

State Bank Governor Jameel Ahmad spoke to the same audience on reserves, remittances and the external account.

Aurangzeb argued the case for a change in the growth model: that stability has become durable, and the next phase should be driven by investment and productivity rather than consumption. Pakistan has announced that shift before. The test is the FY27 numbers, not the FY26 ones.

What it means for you

• Borrowing: the policy rate is 11.5 percent and one-year KIBOR 12.33 percent, both unchanged at the last reading. A lower deficit is the precondition for rates falling further, not a reason they already have. Check what a rate does to a loan on the home loan calculator or the personal loan calculator.
• The rupee: Rs 277.28 to the dollar today, on our dollar rate page. Eurobond proceeds and a smaller deficit both support it.
• Taxes: a deficit cut of this size is made mostly on the revenue side. Federal excise collection reached Rs 840 billion last year. Work out your own liability on the income tax calculator.

The caveat

These are the minister's figures, given in a pitch to investors. The Pakistan Bureau of Statistics publishes the final national accounts, and provisional growth estimates in Pakistan have been revised in both directions in past years. Treat 3.7 percent as the government's number until PBS confirms it.