Inflation is likely to remain at 10 percent in July. Ministry of Finance report released

Islamabad: The inflation rate in the country is expected to be in the range of 9-10 percent in July 2026, the Ministry of Finance has said in the latest Monthly Economic Report. The report says that global energy markets and financial markets could be affected by the escalating geopolitical tensions worldwide, particularly between the US and Iran, which could put pressure on developing economies such as Pakistan.

According to the report, during the financial year 2025-26, Pakistan saw a 33.9% drop in foreign direct investment (FDI). The investment volume decreased to $1.636 billion compared to $2.477 billion in the previous financial year, while only $13.5 million in direct investment was received in June 2026, reflecting a significant slowdown in the investment trend.

According to the Ministry of Finance, the total foreign investment during the financial year was $3.6 billion. However, the positive trend in remittances of Pakistanis living abroad was maintained with the current figure of $41.6 billion representing an increase of 8.6 percent compared to the corresponding period of last year, while the country’s exports, which declined by 4.6 percent at $30.8 billion, remained limited.

According to the report on foreign exchange reserves, the country’s stockpiled reserves were valued at $22.7 billion as on July 17 while the reserves of the State Bank of Pakistan were valued at $17.3 billion as on July 17. The Ministry of Finance states that in this regard, this situation can contribute to enhancing the external payments capacity.

The inflation rate for June 2026 has come down from 11.7 percent in May and stood at 11.1 percent, whereas the average rate of inflation for the fiscal year 2025-26 stood at 7.1 percent. The overall trend in prices is showing signs of improvement, though, the global factors may have a significant role in the upcoming months, said the report.

The Ministry of Finance also has concerns regarding the agriculture sector. Below normal rainfall is likely to cause water shortage for kharif crops which in turn is likely to impact on the production of important kharif crops like cotton, rice, sugarcane and maize, the report said. Food prices and inflation overall may also be affected by the decrease in agricultural production.

As far as economic activities are concerned, the production of large industries grew by 5.8 percent during July-May period, while the tax collection at Federal Board of Revenue (FBR) stood at Rs13.01 trillion during the same period, up 10.8 percent from the previous fiscal year, the report said. These statistics show an increase in Government revenue and improvement in industrial activities.

The report says the fiscal deficit in the period from July to May has been kept low at 1.6 percent of the gross domestic product (GDP), which is considered a positive development in the area of fiscal discipline. But, the uncertainty of the global economy, geopolitical conflicts, risks of energy price volatility and climatic uncertainty might impact the economic performance of Pakistan in the upcoming few months, therefore constant monitoring of economic indicators is required, the Ministry of Finance has stated.