ADB keeps Pakistan's growth at 3.7%

The Asian Development Bank has left its growth forecast for Pakistan unchanged at 3.7%, a level that places the country among the weakest in South Asia. The Manila-based lender, in its main Asian Development Outlook report, also warned that the government may need to reduce spending if the Federal Board of Revenue misses its tax collection goal, according to The Express Tribune.

Household spending is expected to stay subdued this fiscal year because living costs are rising, and inflation is forecast at 8.3% for the new fiscal year, with only Bangladesh higher in the region. The bank expects inflation to sit beyond the central bank's medium-term target band, a development that makes monetary policy more difficult. It also projected growth at 3.7% for fiscal 2026-27 as lingering effects of the Middle East conflict weighed on momentum.

The lender said Pakistan's spending faces pressure from a 16% rise in defence allocations and higher interest payments, partly offset by lower power subsidies. It warned that if revenue collections fall short, expenditure cuts will again be needed, noting the FBR missed the IMF-set tax target by Rs969 billion last year. The current revenue goal is Rs15.263 trillion, and reaching it is critical to releasing Rs1 trillion in provincial grants to the federal government.