The Pakistani government expects the economic situation to improve in the fiscal year 2026-2027 (which begins on July 1) after the end of the US-Iran war.
"We expect improved prospects for the national economy in the fiscal year 2026-2027 after the end of the conflict in the Middle East. The government will focus on minimizing the negative effects of the US-Iran conflict to curb rising inflation and rising energy prices," the head of the Ministry of Finance said. “Due to the conflict, Pakistan's energy infrastructure was severely damaged and it will take time before we return to normalcy in this sector," he told the ag. Reuters Finance Minister of the Islamic Republic Muhammad Aurangzeb.
According to Aurangzeb, “the government's first priority remains to secure the necessary funds for national security given the difficult situation on Pakistan's borders with India and Afghanistan“.
Pakistan's draft budget for the fiscal year 2026-2027, presented by the government in parliament last week, calls for an 18% annual increase in defense spending to PKR 3 trillion ($10.8 billion) and an increase in taxes in line with Islamabad's commitments to the International Monetary Fund. The document forecasts national GDP growth and inflation of 4% and 8.2%, respectively.