Headline inflation may stay at 8-9pc in April: FD

ISLAMABAD: Mounting external sector pressures — marked by a 27 percent drop in foreign direct investment, a 5. 8 percent contraction in exports and a 7. 9 percent rise in imports during the first nine months of the current fiscal year, Finance Division projected a further uptick in inflation, with headline inflation expected to remain within the 8–9 percent range in April 2026 amid ongoing supply chain constraints. The Division in its ‘Monthly Economic Update and Outlook April 2026’ stated that although the ongoing Middle East conflict is posing new risks and heightened uncertainty regarding macroeconomic outlook amid escalating energy cost, yet Pakistan’s economy appears relatively better positioned than in previous episodes of external stress, to manage these emerging challenges effectively. The Economic update noted 27 percent decline in in Foreign Direct Investment (FDI) and 5. 8 percent in exports during the first nine months (July-March) of the current fiscal year 2025-26, compared to the same period of last fiscal year. READ MORE: Average inflation rises 5. 7pc in July-March FY2025-26: Ahsan FDI into the country declined sharply by 27 percent in first nine months (July-March) of the current fiscal year 2026; portfolio investment remained in the negative territory (-943. 8 million USD against – 342. 1 million USD in the same period last year) while Pakistan’s Stock Market index rose by a whopping 44. 3 percent, market capitalisation by 36. 9 percent and incorporation of companies by 22. 7 percent. FDI totalled USD1. 354 billion during July–March fiscal year 2026, down from USD1. 856 billion in the corresponding period of fiscal year 2025. However, increase was witnessed in March 2026 when it increased to USD167. 6 million against USD63. 7 million in March 2025. Main sources of net inflows were China (USD678. 6 million) and Hong Kong (USD253. 7 million). Sector-wise, power (USD714. 2 million) and financial business (USD588. 7 million) attracted the most FDI. Total foreign investment dropped substantially to USD410 million in July–March 2025-26, down from USD1. 514 billion a year earlier. Private and public FPI recorded net outflows of USD550. 3 million and USD393. 5 million, respectively. As of April 17th, 2026, foreign exchange reserves stood at USD20. 6 billion, including USD15. 1 billion held by the State Bank of Pakistan (SBP). The report noted that despite prevailing geopolitical uncertainties, key macroeconomic indicators have remained stable. Based on this momentum, economic activity is expected to remain firm. Despite the potential risk posed by Middle East war and consequently global commodity prices rise and supply chain disturbance, the external position is likely to remain stable, underpinned by higher remittance inflows and IT exports. Overall, the economy appears well-positioned to continue its growth trajectory, supported by strengthening of macroeconomic fundamentals vis-a-vis appropriate and swift policy response to minimize the adverse impacts. Workers’ remittances remained pivotal, increasing by 8. 2 percent to reach USUSD30. 3 billion, compared to USD28. 0 billion last year. It was led by inflows from Saudi Arabia (23. 4% share) and UAE (20. 7%). Monthly inflows for March declined to USD3. 8 billion, down by 5. 5 percent when compared to USD4. 1 billion during the same month of last year. Consumer Price Index (CPI) inflation is recorded at 7. 3 percent on YoY basis in March 2026 compared to 7 percent in the previous month and 0. 7 percent in March 2025. Rising international oil price are being translated domestically overtime, changing the baseline situation. On average, during July-March, FY2026, it stood at 5. 7 percent against 5. 3 percent during the same period last year. Large Scale Manufacturing (LSM) registered a growth of 5. 9 percent during July-February FY2026 against the contraction of 1. 8 percent last year. The growth is mainly driven by the automobiles, wearing apparel, food and coke & petroleum products with contribution of 1. 5 percent, 1. 2 percent, 1. 0 percent and 0. 9 percent, respectively. In February 2026, LSM witnessed a growth of 6. 5 percent on year on-year (YoY) basis while on month-on month (MoM) basis it decreased by 9. 0 percent, mainly due to decline in iron & steel products, leather products and pharmaceuticals. Copyright Business Recorder, 2026

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