Pakistan economic growth sectors 2026.
Pakistan’s medium‑term growth and export prospects are increasingly concentrated in a few “anchor” sectors: IT/ITeS, agriculture & agro‑processing, textiles & apparel, renewable energy, construction/CPEC infrastructure, and healthcare & pharmaceuticals. These sectors differ in maturity and constraints, but together they define the country’s realistic path to export diversification, job creation, and external stability.
1. Information Technology & IT‑Enabled Services (ITeS)
1.1 Sector profile and recent performance
Pakistan’s IT and IT‑enabled services (ITeS) sector has become the third‑largest source of foreign exchange after textiles and rice.
Key indicators:
- IT/ITeS exports reached about 3.8 billion USD in FY 2024–25, growing 18% from 3.2 billion USD the previous year.
- IT/ITeS now accounts for roughly 45% of total services exports.
- The State Bank and other analyses show a CAGR of roughly 24% in ICT exports over FY20–FY22, led primarily by computer services (software and software‑related exports).
- Official IT export data under‑captures actual flows, as a sizable share is routed via freelancers, foreign accounts, and third‑party billing platforms.
Pakistan is also among the world’s top 5 freelance markets, with over 2.3–3.0 million active freelancers by 2024–25 according to various estimates. Freelance earnings are increasingly visible in digital export remittances.
1.2 Drivers: talent, policy, and global trends
- Demographic and skills base
- Government incentives and enabling policies
Major incentives include:- Zero income tax on IT and ITeS exports (up to mid‑2025) and tax exemptions for freelancers up to a defined annual income threshold.
- 100% foreign equity ownership and full profit repatriation for IT investors.
- Higher foreign‑currency retention limits for IT exporters: retention in special forex accounts was raised from 35% to 50%, and in some proposals/announcements even higher for registered IT entities and freelancers.
- Sector strategies such as the Software Development Export Strategy 2023–2027 under the Strategic Trade Policy Framework (STPF) 2020–25, which lays out a five‑year plan for talent development, regulatory reform, market access and innovation.
- Ecosystem and startup growth
- SBP analysis shows 709 million USD in startup funding during 2021–22, up from around 101 million USD in 2019–20, with fintech, e‑commerce, logistics and SaaS prominent.
- Special Technology Zones (STZs) and programs like DigiSkills, Plan9, e‑Rozgar and similar initiatives are building digital skills and formalizing freelancers and startups.
- Remote work and freelancing boom
- Global acceptance of remote work post‑COVID has accelerated outsourcing of software development, digital marketing, design, and back‑office services.
- Pakistan’s freelancers are estimated to have brought in hundreds of millions of dollars annually, with some estimates putting digital freelancing remittances above 1 billion USD potential if payment and regulatory barriers are eased. Information Technology & IT‑Enabled Services (ITeS)
1.3 Constraints and structural challenges
- Regulatory and taxation uncertainty: Frequent policy reversals on tax exemptions and documentation requirements create uncertainty for exporters and deter long‑term investments.
- Payment infrastructure gaps: Limited availability of global payment platforms (e.g. PayPal) and stringent EMI requirements raise transaction costs for freelancers.
- Skills gap and quality issues: While the quantity of graduates is rising, industry reports highlight gaps in advanced skills (AI/ML, cybersecurity, product management) and soft skills.
- Digital infrastructure: Broadband quality, costs, and power outages still constrain firms outside major cities. Information Technology & IT‑Enabled Services (ITeS)
1.4 Strategic opportunities
- Moving up the value chain: From pure services and body‑shopping to IP‑based products, SaaS, AI solutions, cybersecurity services, and specialized BPO/KPO niches.
- Verticals where Pakistan can excel: Fintech for emerging markets, logistics tech, agritech (given the large agriculture base), healthtech (tapping domestic healthcare gaps), and e‑commerce enablers.
- Freelance formalization: Supportive regulations, seamless digital payments, and light‑touch taxation could push freelance earnings beyond 1 billion USD annually, strengthening external accounts.
Overall, IT/ITeS is Pakistan’s clearest medium‑term growth engine: high‑margin, low import content, and scalable with human capital and policy consistency.
2. Agriculture & Agro‑Processing
2.1 Sector profile and performance
Agriculture remains the backbone of Pakistan’s economy:
- Contributes about 24% of GDP.
- Employs around 37–40% of the labour force (36.1% in 2023, per World Bank data).
- Provides critical raw materials for textiles (cotton), sugar, dairy, meat, etc.
In FY 2023–24, agriculture grew by 6.25%, driven by a strong 11.03% growth in crops. Major crops (wheat, rice, cotton, sugarcane, maize) contributed nearly 4.97% to GDP via agriculture value addition, while other crops added another 3.25%.
2.2 High‑value exports and agro‑processing
Pakistan is a significant producer and emerging exporter of rice, mangoes, citrus (kinnow), dates, and some vegetables:
- Agriculture and food product exports reportedly rose to about 8 billion USD in 2023–24, up roughly 37% from the prior year.
- Rice alone contributed around 2.5 billion USD in exports (≈42% of agricultural exports) in FY 2022–23.
- Pakistan ranks among the top global producers and exporters of mangoes, citrus and dates:
- Fruit exports (dominated by citrus and mango) have grown, but still represent a small share (≈0.37% of total exports, ≈0.1% of GDP), indicating large untapped potential.
Agro‑processing is still underdeveloped:
- Only about 3% of fruit output is processed into value‑added products like pulps, concentrates, frozen and preserved goods.
- Infrastructure gaps (cold chains, grading, packaging, certification, logistics) limit access to high‑value markets. Information Technology & IT‑Enabled Services (ITeS)
2.3 Water management and modernization
Pakistan is highly water‑stressed, and agriculture is by far the largest water user. Key points:
- The National Water Policy 2018 and subsequent technical work highlight inefficient water use, low productivity, weak groundwater management and poor coordination between water and agriculture institutions.
- Projects like Water Management for Enhanced Productivity (WMfEP) in KP and FATA aim to close the gap between irrigation infrastructure and governance, improve water distribution and increase farm incomes.
- On‑Farm Water Management (OFWM) initiatives (renovated watercourses, laser land levelling, farm demonstration centers) have shown tangible productivity gains and stimulated farmer demand for water‑saving technologies.
However, systemic issues remain:
- Canal systems suffer from seepage, inequitable distribution, and politicized allocations.
- Only a small fraction of wastewater is treated; water governance and pricing reforms are limited.
- Climate change (floods, droughts, heat stress) is increasing volatility in yields and threatening food security.
2.4 Policy initiatives and opportunities
Emerging initiatives and opportunities include:
- A national agricultural modernization plan focused on mechanization, precision agriculture, post‑harvest processing, and livestock health (e.g., foot‑and‑mouth disease‑free zones).
- Expansion of olive cultivation and other oilseed crops to reduce edible oil imports.
- Horticulture and high‑value crops: Large areas remain suitable for fruits and vegetables with strong export potential, especially if cold chains and processing are scaled.
- Livestock: Livestock already contributes around 60–64% of agriculture value added and around 15% of GDP, with steady growth above 4% in recent years, driven by dairy and meat demand. This segment can support processed dairy, meat exports, and leather.
In summary, agriculture has recently re‑emerged as a growth driver, but its export and value‑addition potential depend on water governance, climate resilience, and agro‑processing investments.
3. Textiles & Apparel
3.1 Sector profile and export performance
Textiles and apparel remain Pakistan’s largest export earner and industrial employer:
- Textiles account for roughly 48–60% of total exports, about 30% of large‑scale manufacturing value‑added, and around 40% of industrial employment.
- In 2023, Pakistan exported about 18.4 billion USD of textiles, making it the 9th largest textile exporter in the world.
- Textiles were the number one export product group in 2023.
Recent trends:
- Textile and apparel exports reached about 9.05 billion USD in July–Dec 2024, a 9.67% year‑on‑year increase, contributing about 54.6% of total exports in that period.
- From July 2024–April 2025, textile & apparel exports were reported around 14.8 billion USD, up ≈8.4% versus the previous year.
- Value‑added segments like knitwear, readymade garments and home textiles led the growth, while some basic intermediate products saw weaker performance.
3.2 Competitive pressures and structural challenges
The sector faces intense competition from Bangladesh, Vietnam, India and China:
- Energy costs are among the highest in the region. Industry sources report electricity tariffs of 13–15 US cents/kWh for Pakistani mills, often nearly double those in Bangladesh or Vietnam (around 5–9 cents/kWh), severely eroding competitiveness.
- Frequent power outages and grid instability damage machinery and disrupt production schedules.
- Cotton volatility: Although Pakistan is a major cotton producer, climate shocks, pests and crop shifts caused a roughly 33% drop in cotton output between 2024 and 2025, increasing reliance on imported fiber and raising costs.
- Policy unpredictability, delays in refunds, and inconsistent incentive regimes further undermine investment planning.
3.3 Policy response and move up the value chain
Recognizing these challenges, the government and industry are repositioning toward higher‑value products:
- The Textiles and Apparel Policy 2020–25 explicitly prioritizes a shift from greige and semi‑processed materials toward value‑added garments, technical textiles and made‑ups, supported by tariff rationalization and competitiveness measures.
- A National Technical Textile Council has been created to develop a roadmap for technical textiles (medical, automotive, protection, construction, agriculture, packaging, sports), aiming to tap into a projected 300+ billion USD global market by 2030.
- The National Cotton Plan 2025 seeks to boost cotton yields, reduce costs and support an export‑led textile model based on better raw material quality and diversification into man‑made fiber (MMF)–based apparel.
Industry leaders are also investing in:
- Home textiles and branded garments with strong design content, certifications (GOTS, OEKO‑TEX, BCI) and sustainability credentials to secure higher‑margin orders.
- Vertical integration (from spinning to finished garments) and renewable energy (e.g., rooftop solar) to reduce energy costs and improve traceability.
3.4 Outlook
Even with cost disadvantages, Pakistan retains strong capabilities in home textiles, towels, bedding and mid‑ to high‑quality garments. If energy pricing becomes regionally competitive and policy remains stable, the shift to value‑added and technical textiles can: Information Technology & IT‑Enabled Services (ITeS)
- Raise export earnings without proportionate increases in volume;
- Support better wages and more resilient supply chains;
- Anchor upstream sectors (cotton, synthetics) and downstream retail branding.
4. Renewable Energy
4.1 Current energy mix and capacity
Pakistan’s power sector has experienced rapid capacity expansion, but with high dependence on imported fuels and expensive capacity payments:
- As of July–March FY 2025, total installed electricity generation capacity stood at about 46,605 MW, up from 45,888 MW a year earlier.
- The Private Power & Infrastructure Board (PPIB) reports 88 operational IPPs with a cumulative 20,726 MW capacity, including significant hydropower, wind, solar and bagasse projects.
Renewable specifics:
- Wind: 36 private wind projects are operational, producing roughly 1,845 MW.
- Solar (utility‑scale): About seven solar IPPs totaling ≈530–680 MW are connected to the grid, with additional projects under development.
- Hydropower: Around 9,000 MW of installed hydro, with plans to add ≈13,000 MW more by 2030.
Pakistan’s renewable energy policy envisions 60% of power from renewable resources by 2030, including hydro. The Indicative Generation Capacity Expansion Plan (IGCEP) 2024–34 foresees total capacity rising toward 57,000 MW by 2034, with renewables (including hydro) potentially reaching around 57% of the mix.
4.2 IGCEP 2024–34: shift toward indigenous and lower‑cost power
The government has revised the IGCEP to reduce reliance on costly imported‑fuel projects:
- The updated plan drops or reschedules about 7,967–8,000 MW of high‑cost projects, cutting the expansion target from nearly 15,000 MW to about 7,017 MW of new capacity.
- It prioritizes 7,987 MW of projects based on hydropower, solar, wind and nuclear, aiming for total savings of about 4,743 billion PKR (≈17 billion USD) over the plan period.
- The strategy is to achieve affordability, fuel security and a more competitive electricity market, phasing out take‑or‑pay contracts and moving toward competitive bidding.
However, critics argue that the IGCEP is over‑weighted toward large hydropower and still underutilizes Sindh and Balochistan’s massive solar and wind potential, which could diversify risk and lower costs further.
4.3 Flagship project: Diamer‑Bhasha Dam
The Diamer‑Bhasha Dam is a multi‑purpose mega‑project on the Indus:
- Designed as a 272‑meter‑high RCC gravity dam, expected to be the world’s tallest RCC dam.
- Gross storage: about 8.1 million acre‑feet (≈10 BCM); live storage around 6.4 MAF, helping irrigation and flood management.
- Installed capacity: ≈4,500 MW, expected to produce roughly 18 billion kWh annually of low‑cost hydropower.
- Scheduled completion is around 2029, with excavation, river diversion and preliminary works advanced and roller‑compacted concrete (RCC) placement on the main dam planned to commence early 2026.
Diamer‑Bhasha will:
- Extend the life of downstream Tarbela by trapping upstream sediment;
- Enhance water security for irrigation;
- Provide baseload renewable energy, buttressing grid stability.
4.4 Opportunities and bottlenecks
Opportunities:
- Wind potential along the Gharo–Keti Bandar corridor alone is estimated at around 50,000 MW.
- Pakistan has high solar insolation (≈9.5 hours of sunshine/day on average), making utility‑scale and distributed solar (including net‑metering) attractive.
- Falling solar and wind technology costs globally make renewables increasingly cost‑competitive relative to RLNG and imported coal.
Key constraints:
- Grid and planning bias: Current planning tilts toward large hydro; limited grid reinforcement and flexible resources constrain variable RE integration.
- Regulatory and contractual legacies: Existing take‑or‑pay thermal contracts and capacity payments reduce room for new RE unless renegotiated or retired.
- Financing and risk allocation: FX risk, off‑taker risk, and policy unpredictability affect investor appetite, particularly for private solar and wind.
If policy follows through on IGCEP’s intent—prioritizing indigenous and least‑cost renewable projects and enabling a competitive power market—renewables can significantly lower the cost of doing business for other export sectors (notably textiles and IT) and improve external balances.
5. Construction & CPEC‑Related Infrastructure
5.1 Sector profile and cyclical downturn
Construction historically has been a major contributor to GDP and employment:
- The sector accounts for around 2.2–2.5% of GDP and employs roughly 7.5–9.5% of the employed labour force.
- It has strong linkages to cement, steel, glass, transport and services, and is a traditional absorber of low‑skilled labour.
However, recent macroeconomic crises and fiscal consolidation have hit construction hard:
- The World Bank’s Pakistan Development Update notes that tighter fiscal policy and cuts in development spending led to a sharp slowdown in construction and allied industries in FY24, with negative growth in key sub‑sectors like cement and steel.
- Sector research shows construction contracted by around 17–18% year‑on‑year in 1H FY24, after previously strong nominal growth driven largely by cost inflation.
- A separate 2024 industry report projects a 3.5% real contraction in construction output in 2024, citing political instability, weak governance, rising material costs and reduced investment.
The downturn has serious employment implications, as construction employs a high share of poor and daily‑wage workers; fiscal consolidation thus directly suppresses job creation in this sector.
5.2 CPEC infrastructure and its spillovers
The China–Pakistan Economic Corridor (CPEC) has been the primary driver of large‑scale infrastructure investment over the last decade:
- In the power sector, 13 CPEC power projects with a total capacity of about 8,020 MW plus the ±660 kV Matiari–Lahore HVDC line (4,000 MW) have achieved commercial operation.
- In transport infrastructure, early harvest projects include:
- Havelian–Thakot (KKH Phase II);
- Multan–Sukkur Motorway (M‑5);
- Hakla–D.I. Khan Motorway;
- Orange Line Metro Train (Lahore);
- Khuzdar–Basima Road (N‑30) and other highway upgrades improving connectivity, particularly in underdeveloped regions.
- In Gwadar, completed projects include the Gwadar Eastbay Expressway, initial port and free zone development, and basic utilities (desalination, hospital, vocational facilities).
The Pakistan Economic Survey 2024–25 highlights that eight major transport projects worth about 6.7 billion USD have been completed, with several more (e.g., Zhob–Quetta, Nokundi–Mashkhel, Awaran–Khuzdar roads) under implementation or planning.
CPEC’s impacts:
- Improved connectivity has reduced travel time and logistics costs, opening up remote regions to trade and investment.
- Construction activity created substantial temporary employment and boosted demand for cement and steel during peak years.
- Planned Special Economic Zones (SEZs) along CPEC routes are intended to translate infrastructure into industrial clusters, though progress has been slower than initially envisaged.
5.3 Constraints and outlook
Current constraints:
- Fiscal space is extremely tight; primary surpluses are being achieved partly by compressing development expenditure, which directly depresses public‑sector construction.
- High interest rates, inflation and import restrictions have raised financing and input costs for private developers and housing projects.
- Political and policy uncertainty undermines investor confidence in long‑term infrastructure concessions.
Medium‑term drivers:
- Urbanization and housing demand: Pakistan faces a large housing shortfall and rapid urbanization, implying strong latent demand for housing, urban infrastructure and utilities.
- Completion and operationalization of CPEC SEZs: If SEZs effectively attract manufacturing and logistics investments, they will create sustained demand for industrial construction and related services.
- Public‑private partnerships and multilateral financing can help decouple infrastructure investment from the central government’s annual budget constraints.
At present, construction is not a short‑term growth engine due to macro stabilization but remains a medium‑term driver contingent on fiscal space and policy continuity.
6. Healthcare & Pharmaceuticals
6.1 Healthcare system overview
Pakistan’s healthcare system is dual and under‑resourced:
- Public spending on health has historically hovered around 1.0–1.4% of GDP, far below WHO benchmarks; the FY 2024 health sector PSDP allocation was about 103.5 billion PKR, and public health expenditure around 0.9% of GDP in FY 2024.
- The system comprises public, private and NGO providers with significant urban‑rural disparities and shortages of health workers, particularly nurses, paramedics and rural doctors.
- Pakistan has high infant mortality (≈50 per 1,000 live births in 2023) and relatively low life expectancy (≈67.6 years), reflecting persistent gaps in access and quality.
A major reform is the Sehat Sahulat Program (SSP), a national social health protection initiative:
- SSP aims for universal health coverage through government‑financed health insurance, providing up to one million PKR per family per year for inpatient care at empanelled public and private hospitals.
- By early 2022, SSP had reportedly served about 154 million people, with over 3.2 million hospital visits recorded, reducing out‑of‑pocket expenses for many households.
Nevertheless, key challenges persist:
- Underfunding, fragmented governance, and weak primary care;
- Heavy reliance on the private sector, which is often unaffordable for poorer households, while public facilities face quality and staffing issues.
- Limited focus on preventive care and public health, resulting in high burdens of communicable and non‑communicable diseases.
6.2 Pharmaceutical industry: domestic role and export growth
Pakistan’s pharmaceutical industry is relatively advanced within the region:
- Roughly 650 local pharma companies serve a domestic market estimated around 3.2 billion USD, meeting most of the population’s medicine needs.
- The sector has increasingly turned to exports as domestic profitability was squeezed by price caps and currency devaluation.
Export performance:
- Pharmaceutical exports grew about 34% in FY 2024–25, reaching 457 million USD, the fastest growth in two decades and placing pharma among the top five fastest‑growing export categories.
- Therapeutic goods (pharmaceuticals, surgicals, nutraceuticals, medical devices, etc.) collectively reached about 909 million USD in exports in FY25.
- Industry leaders project that with the right policies and facility upgrades, pharma exports could reach 5 billion USD within 8 years, transforming it into a major export earner.
Growth drivers:
- Deregulation of non‑essential medicine prices in early 2024 allowed firms to adjust for inflation, invest in production and prioritize exports.
- Rising demand from less‑regulated markets in Asia, Africa and the Middle East (Afghanistan, Sri Lanka, Uzbekistan, Iraq, Kenya, Vietnam, Myanmar, Thailand, etc.).
6.3 API manufacturing: strategic but nascent
Despite local formulation capacity, Pakistan heavily depends on imported Active Pharmaceutical Ingredients (APIs):
- DRAP has issued 23 API manufacturing licenses, but only about 7–10 companies are operational, producing around 16–32 key APIs (paracetamol, ibuprofen, various antibiotics, etc.), meeting perhaps ≈15% of national API demand.
- A PIDE‑backed study and subsequent policy brief argue that Pakistan could substantially substitute API imports and build exports if it:
- Establishes API parks and an independent API R&D centre;
- Provides targeted fiscal and regulatory incentives;
- Improves quality and compliance to secure US FDA / EMA approvals.
The global API market (≈216 billion USD) and expiring patents worth ≈380 billion USD by 2025 present a time‑bound opportunity for Pakistan to position itself as a competitive API and generic exporter.
6.4 Digital health and med‑tech
Pakistan’s digital health and med‑tech segment is emerging:
- Private hospitals and diagnostics centers in urban areas increasingly use telemedicine, electronic medical records and connected devices, while a large private sector fills gaps left by overstretched public facilities.
- Startups are exploring teleconsultations, e‑pharmacy, health insurance technology, and diagnostic platforms, often leveraging the broader IT ecosystem.
Given rising chronic disease burdens, urbanization and smartphone penetration, this segment may become a significant growth niche, particularly when combined with the IT sector’s capabilities.
6.5 Strategic implications
Healthcare and pharmaceuticals are domestically demand‑driven but export‑capable:
- Demographics and epidemiological transitions guarantee steady local demand for healthcare and medicines.
- The pharma sector already meets most domestic needs and is beginning to scale exports rapidly, especially to less‑regulated emerging markets.
- A focused API and generics strategy, plus investment in quality upgrades and regulatory compliance, could turn pharma into a multi‑billion‑dollar export sector, while improving medicine security at home.
Cross‑Sector Synthesis and Strategic Takeaways
- IT/ITeS and pharma are the most dynamic export growth stories
Both sectors show double‑digit export growth with relatively low import content and high value addition, making them crucial for external stability. - Agriculture, textiles and construction are highly sensitive to energy, water and macro policy
- Agriculture’s recent recovery is impressive but vulnerable to water scarcity and climate; modernization and water governance reforms are central.
- Textiles’ competitiveness hinges on energy tariffs and reliability, as well as the pivot to value‑added and technical products.
- Construction and CPEC activity are constrained by fiscal consolidation and high financing costs but retain strong medium‑term potential once macro stability deepens.
- Renewable energy is a cross‑cutting enabler
Scaling solar, wind and hydro can:- Lower industrial energy costs, boosting textiles, IT, and manufacturing competitiveness;
- Reduce fuel imports and improve the current account;
- Support climate commitments and resilience.
- Healthcare & pharmaceuticals link domestic welfare with export potential
Strengthening healthcare delivery (especially primary care and UHC) improves human capital, while pharmaceutical and med‑tech exports generate high‑margin foreign exchange. - Policy consistency and institutions are the binding constraint
Across all six sectors, the common needs are:- Stable, predictable policies and tax regimes;
- Reliable, affordable energy and logistics;
- Investment in skills and innovation;
- Strengthened regulatory and quality infrastructure (for IT data protection, food safety, drug regulation, and energy planning).
If Pakistan can maintain macro stabilization while prioritizing these six sectors with coherent, long‑term policies, it can gradually transition from a low‑productivity, import‑dependent economy to a more diversified, export‑driven and knowledge‑intensive growth model.
official pakistan government websites
| Federal Board of Revenue | Federal Board of Revenue |
| Ministry of Finance | Ministry of Finance |
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