Growth estimate

The International Monetary Fund and the Asian Development Bank are already undercutting the government's modest 4% GDP growth target by projecting growth in the range of 3.5% to 3.7%. While the variances can be considered to be within an acceptable margin of error, it is worth noting that just a few months ago, the ADB had actually projected growth to be 4.5%.

The ADB's downgrade cites higher energy costs and anticipated pressure on remittances. These concerns can't just be brushed aside. Energy prices have indeed shot up in recent months, and despite some respite in fuel prices, gas and electricity are still getting more expensive, and even fuel prices may shoot up again if the US-Iran ceasefire collapses.

One recent bright spot, however, has been remittances hitting record levels last year - $41.6 billion. That represents an 8.6% year-on-year increase, despite difficult economic circumstances in many of the countries from which those remittances originate. In fact, the decline in the year-on-year remittance growth rate - it was 26.6% in 2025 and 10.7% in 2024 - can fairly be attributed to the economic circumstances of overseas Pakistanis. And, soaring energy prices are squeezing industrial margins and household budgets around the world, which is also causing inflation projections to remain relatively high, with the government and ADB projecting 8.2% and 8.3%, respectively.

The global impact of the Iran War and its fallout, however, are bound to suppress remittances, as overseas Pakistanis continue to balance economic uncertainty in their host countries against the needs of their families back home. At policy level, this is yet another reason for the government to make a concerted effort to reduce its reliance on remittances to keep the country afloat. As an energy importer, our economy is already disproportionately sensitive to global events, and the added dependence on remittances means that an event thousands of miles away can feasibly collapse the economy because domestic production and exports cannot sustain it.