Govt expects easing inflationary pressure in new fiscal year following reopening of Strait of Hormuz

ISLAMABAD: Following inflation reaching a new high of 12pc in June, inflationary pressures are expected to decrease in the next financial year on account of the opening up of the Strait of Hormuz due to increased peace efforts.

"With expected easing of geopolitical tensions following the US-Iran ceasefire, economic prospects of Pakistan for the fiscal year 2027 are likely to improve further on the back of continuity of reforms, improved confidence and a more conducive business environment", said the Ministry of Finance in its Monthly Economic Update and Outlook (June 2026).

"It was because of the recent easing of geopolitical tensions and continued peace efforts in the Middle East that global market sentiments have become positive," said the ministry.

"This development would lead to easing of international crude oil prices, which in turn would ease import pressure on inflation," said the ministry.

However, despite projecting June inflation, as captured in the consumer price index (CPI), to stay within the range of 11-12pc, the ministry pointed out that falling international oil prices would boost Pakistan’s external accounts by curbing the country’s oil import bill.

Commenting on the closure of fiscal year 2025-26, it said that Pakistan had successfully managed to stabilise its economy with its improved macroeconomic performance and the economy would continue growing at the same pace due to good macroeconomic fundamentals, steady expansion of the manufacturing sector, especially LSM, stable external accounts, fiscal discipline, and sustained agriculture performance.

“On the domestic front, macroeconomic policies and fiscal consolidation measures along with the focused efforts in support of production areas will ensure that Pakistan will continue to grow economically while maintaining its macroeconomic stability,” it added, saying that the prospects for the external sector had also further strengthened owing to record remittances received in May 2026 and IT exports.

Robust workers’ remittances and IT exports, it said, were expected to reinforce the balance of payments, support foreign exchange reserves, and enhance resilience against external shocks.

“Overall, with geopolitical risks receding, global energy prices moderating, inflationary pressures easing and external buffers improving, Pakistan’s economic outlook remains favourable, with growth expected to strengthen while maintaining macroeconomic stability”, the finance ministry maintained.

It further said that the national economy was concluding FY2026 on a “stronger footing”, with improved macroeconomic stability and sustained recovery in economic activity.