Karachi:
The State Bank of Pakistan (SBP) has cut its growth perspective of the FY26, warning that devastating floods will maintain the expansion of the real GDP near the lower end of its previous forecast range of 3.25% –4.25%. Private sector analysts, however, paint a uniform hat image, with upper line values reviewing their projection to only 2.75%-. 25%, below 3.5%–4.0%, amid generalized agricultural losses and growing macroeconomic pressures.
Topline Securities has reduced Pakistan’s economic growth forecast for fiscal year 26, warning that floods and heavy rains have interrupted agriculture and are likely to weigh on broader macroeconomic indicators. The revised perspective comes days ahead of the second semiannual review of the International Monetary Fund (IMF) of the Extended Fund Installation (EFF) of $ 7 billion of the country on September 25, 2025.
Higher line projects so that agricultural growth has been cut to 2.6%of 3.4%, and key crops are expected to enter 2.3%. “Now we expect 15% and 10% damage to rice and cotton, respectively,” the report said.
A few days before, Arif Habib Limited (AHL) also reviewed its projections in agricultural production due to floods.
“We hope that GDP growth has decreased from 3.46% to 3.17% after flooding,” said Sana Tawfiq of Ahl while talking to the express tribute.
Pakistan’s economy faces new winds against since the initial estimates place the cost of 2025 floods in RS409 billion ($ 1.4 billion), or 0.33% of GDP, according to AHL Research. Agriculture led to profit with losses greater than RS302 billion (0.24% of GDP), which underlines the vulnerability of the sector to climatic shocks. Damages for transport and communication infrastructure are valued at RS97.6 billion, while housing losses are RS8.95 billion. Livestock losses were minimal at RS0.5 billion.
The director of the values of the upper line, Shankar Talria, said that the current account (CAD) deficit is expected at the upper end of 0-0.5% of GDP, since it is forecast that imports will grow by 10% versus 9% before, while exports can only increase 1% compared to the previous 4%. However, remittances are reviewed to a growth of 6%, or $ 40.2 billion, “reflecting historical increases during crises.”
Floods have caused an increase in food prices, with wheat and flour by 38-40% and key vegetables increase approximately 40% in recent weeks. Inflation for FY26 is now expected with 6.5%-7.5%, versus 6%-7%before. September food inflation alone is projected to 8% -9% month by month.
Sheikh Muhammad Tehseen, a businessman, warned that the decrease in agricultural production after recent floods will have high range consequences throughout the food value chain. He said that the interruption will not only reduce the domestic availability of key products, but will also affect food exports, including packaged and processed items, which will affect Pakistan’s commercial gains.
Tehseen urged the government to formulate a comprehensive strategy to cushion the agricultural sector against these clashes. He recommended measures to boost crop production in unf affected areas to compensate for possible deficits. At the same time, he emphasized support to local industries by limiting energy and public services rates and reduce the policy rate. Such steps, he argued, would improve industrial production, would sustain exports and help reduce the imminent commercial deficit.
The president of the Sindh Abadgar Board (SAB), Mahmood Nawaz Shah, set some hope in cotton. Highlighting that Cotton arrivals in Sindh have increased by approximately 40%, exceeding expectations, said Sindh now represents almost half of the Pakistan cotton area, with limited losses in about 10%. While Punjab can see setbacks in the coming weeks, Sindh’s harvest is still resistant. Rice production is also expected to remain stable, with possible losses that did not cross 10%, which increases the hopes of a bumper harvest if last year’s challenges are not repeated. Looking towards Rabi’s season, Shah emphasized the importance of wheat, noting that adequate winter rains could guarantee enough water supplies. Even a wheat deficit of 5–10%, he added, could be balanced with profits in other feeding crops.
Given these risks, Topine does not see more monetary relaxation. “We hope that the policy rate of less than 11% instead of our previous 10% forecast,” he said.
The fiscal deficit for the FY26 is reviewed up to 4.8% of the GDP of 4.1%, since the income is projected in RS13.6 billion compared to the previous RS14.1 billion. The main balance in 1.6% of GDP is expected. The Government has declared an agricultural emergency, with possible exemptions of electricity for homes affected by floods.
Despite the pressures, Topine expects the IMF program to remain intact. “Any relaxation of income or balance objectives cannot be ruled out, preceding given during past floods,” he said.
The external financing requirement of Pakistan is $ 10.5-11.5 billion, with reservations projected above $ 17 billion by June 2026. The rupe is forecast at RS292-297 per dollar for that date.
TOPLINE said the reforms remain on their way, including the privatization of the International Pakistan airline, the resolution of circular debt and investment in mining, drilling in high seas and renewable energy. The Reko diq project is expected to achieve soon.
“Although the floods pose short -term challenges, Pakistan’s resistant base and the current reforms will support recovery,” the report said.
