Pakistan’s Business Landscape: The 2025 Recovery, the Reforms and Where the Opportunities Are in 2026

Where things stand

Here is the simplest way to put it. Three years ago businesses in Pakistan were asking whether the country would default on its debts. Today they are asking how fast it can grow.

That is a real change. It did not happen by accident, and it is not yet secure. This guide sets out what improved, why, what is still wrong and where people who run businesses see their chances.

Pakistan has done the hard part of stabilising: it stopped spending money it did not have. It has not yet done the harder part, which is to give businesses a reason to invest and expand.

From crisis to recovery: the short history

What improved in 2025 and 2026

1. Growth came back

The economy grew 3.7 per cent in the year to June 2026. That was the fastest in four years, though short of the 4.2 per cent the government had aimed for.

The finance minister said growth would have passed 4 per cent but for three shocks: uncertainty over American tariffs early in the year, the floods of 2025 and a conflict in the Middle East from March 2026.

2. The government’s books improved

For years the state spent far more than it collected. That gap narrowed sharply.

• The primary balance, which is the budget before interest payments, was in surplus by about 3 per cent of the economy.
• The overall deficit for the first nine months of 2025-26 was 0.7 per cent of the economy, against 2.6 per cent a year earlier.

This is what the IMF programme demands, and it is why lenders and rating agencies have warmed to Pakistan.

3. Dollars returned

The jump came from three sources: IMF and other official loans, strong remittances from Pakistanis working abroad, and, in 2026, the sale of bonds to international investors for the first time in years.

4. The rating agencies took notice

A higher rating makes it cheaper for the government and for large companies to borrow abroad. S&P said it was raising the rating because of stronger institutions, steady reform under the IMF programme and rebuilt reserves. It also warned that the rating could fall again if the commitment to budget discipline weakened.

5. The stock market soared

The main index of the Pakistan Stock Exchange, the KSE-100, was among the best-performing in the world.

It rose 44 per cent in the year to June 2026. It has fallen back since, by about a tenth from its peak, as the Middle East conflict and rising inflation unsettled investors.

6. A privatisation finally happened

For twenty years governments promised to sell loss-making state companies and failed. In December 2025 a consortium led by a Karachi financial group won the auction for three-quarters of Pakistan International Airlines with a bid of 135 billion rupees. Control passed to the buyers on 29 June 2026.

It was the largest privatisation in the country’s history. More are promised, including electricity distribution companies.

What did not improve

A business owner in Lahore or Karachi would tell a less cheerful story.

Inflation is back

After falling to low single digits in 2025, prices are climbing again.

The main causes are fuel and electricity prices, pushed up by the conflict in the Middle East. The State Bank’s own target is 5 to 7 per cent.

Money is still expensive

The State Bank’s policy rate stood at 11.5 per cent in September 2026. It had been cut from a peak of 22 per cent, but with inflation at 10 per cent there is no room to cut further for now. A business borrowing from a bank pays several points more than that.

Taxes fall on the few who pay

The government raised revenue mainly by taxing those already in the net: salaried people, large companies, banks. Firms complain of a tax burden among the highest in the region, including a “super tax” on big companies. Large parts of retail, wholesale, property and farming remain lightly taxed.

Energy costs more than in rival countries

Electricity for industry in Pakistan costs noticeably more than in Bangladesh, India or Vietnam. The reasons are old contracts with power producers, losses and theft in distribution, and taxes loaded on to bills. Many factories have turned to their own solar panels and generators.

Investment is low

Pakistan invests only about 13 to 14 per cent of its income each year, around half the rate of its neighbours. Foreign direct investment is small. Without more investment, growth of 3 to 4 per cent is close to the ceiling.

The reforms

Much of what changed was required by the IMF. The main items:

An IMF team visited in late September 2026 to review progress. Reports before the visit pointed to a shortfall in tax collection, government meddling in the wheat and sugar markets and slow progress on governance targets. The outcome had not been announced when this article was written.

The investment council

In 2023 the government set up the Special Investment Facilitation Council, a body in which ministers and the army’s leadership sit together. Its job is to cut through red tape for large investors, especially from the Gulf, in farming, mining, energy and technology.

Supporters say it gives investors one door to knock on. Critics say it has announced more than it has delivered, and that a council dominated by the military is no substitute for courts and regulators that work. Among its recent decisions, it cleared the way in April 2026 for seven new cement plants worth about 700 million dollars.

Where the opportunities are

What follows is a summary of where business people and analysts say they see openings. It is opinion, and none of it is advice.

Information technology and freelancing

Software and services exports have grown faster than any other export for a decade and are now worth several billion dollars a year. The country has a large pool of young English-speaking graduates and one of the world’s biggest communities of online freelancers. The obstacles are patchy internet, payment restrictions and sudden shutdowns.

Minerals

Pakistan has large untapped deposits of copper, gold and other minerals, above all the Reko Diq project in Balochistan, one of the biggest undeveloped copper-gold deposits in the world. The government has courted American, Saudi and Canadian investors. The risks are security in Balochistan, disputes with the province over revenue and the long time mines take to build.

Solar and energy

Pakistanis have imported solar panels on an extraordinary scale since 2023, making the country one of the largest markets for them in the world. That has created businesses in installation, batteries and financing. It has also left the national grid with fewer paying customers, which is a problem the government has yet to solve.

Agriculture and food

Farming employs more than a third of workers and uses methods that waste water and yield far less than in comparable countries. There is room for better seed, storage, processing and export of rice, fruit, meat and dairy. Corporate farming schemes backed by the investment council are under way and are controversial with small farmers.

Textiles and beyond

Textiles still make up more than half of goods exports. Exporters gained when the United States set a lower tariff on Pakistani goods than on some competitors in 2025. The longer-term need is to move into higher-value garments and to sell something other than textiles.

Consumer markets

A country of some 250 million people, most of them young, is a large market for food, phones, motorbikes, banking and online shopping, even at low incomes. Digital payments have grown very fast.

Finance

With interest rates down from their peak and the stock market up, more companies have listed shares and issued bonds. Islamic banking is growing quickly, helped by a constitutional deadline to end interest by 2028.

The risks

Anyone doing business in Pakistan weighs the following.

1. Politics. The most popular opposition leader is in prison, and his party is again staging protests. Political calm is not assured.
2. Security. Militant violence in Khyber Pakhtunkhwa and Balochistan has risen since 2021. Relations with India and Afghanistan are tense.
3. The outside world. Fuel prices, American trade policy and conflict in the Middle East can each knock the economy off course, as 2026 showed.
4. Climate. Floods in 2022 and 2025 destroyed crops, roads and homes. They will come again.
5. Reform fatigue. Past IMF programmes were abandoned once the crisis passed. If spending is loosened before the next election, the gains could be lost.
6. Debt. Interest payments still take a very large share of the federal government’s revenue.

Words used in this article

Timeline

What to watch next

• The IMF’s verdict on its September 2026 review, and whether the next instalment is paid on time.
• The State Bank’s decision at its meeting on 26 October 2026.
• Inflation: whether it falls back into single digits by early 2027.
• The next privatisations, especially the electricity distribution companies.
• Exports: the single best measure of whether the recovery is real.

For the politics behind the economics, read our plain-English guide to Pakistan’s politics and our explainer on the National Assembly, which passes the budget each June.

Frequently asked questions

Sources

• Dawn, “Economy grows 3.7pc in FY26 — fastest in four years, but short of target” — 11 June 2026.
• Business Recorder, “Economic Survey: Pakistan misses GDP growth target as IMF talks continue” — June 2026.
• Aaj English, “State Bank keeps policy rate unchanged at 11.5%” — 2026.
• ARY News, “SBP foreign exchange reserves hit all-time high to $26.8 billion” — September 2026.
• The News, “S&P upgrades Pakistan’s sovereign credit rating to B” — July 2026.
• The Express Tribune, “Arif Habib Consortium takes over PIA management as govt formally completes privatisation process” — 29 June 2026.
• ProPakistani, “IMF mission to visit Pakistan this month for biannual review” — 11 September 2026.
• Pakistan Bureau of Statistics, press release on inflation, September 2026
• Arab News, “Pakistan’s top investment body clears $700 million investment for seven cement plants” — April 2026.
• State Bank of Pakistan — for official data.