ISLAMABAD (PEN) : The International Monetary Fund (IMF) has revised Pakistan’s economic growth projection downward to 2.6% for the current fiscal year, citing ongoing structural challenges and weak private investment. This adjustment marks a decline from the previous forecast of 3% made in January 2025.
Growth Outlook Revised Amid Structural Challenges
In its latest World Economic Outlook (WEO) report, the IMF acknowledged improvements in Pakistan’s external indicators but highlighted persistent vulnerabilities in the growth outlook. Analysts attribute the downgraded growth estimate to ongoing structural challenges, weak private investment, and fiscal consolidation efforts under the Fund’s programme.
The government had set a GDP growth target of 3.6% for the current fiscal year. However, the IMF now projects a rebound next year, with GDP growth expected to rise to 3.6%, contingent on the successful implementation of reforms and stabilization efforts.
Inflation Expected to Decline Significantly
The IMF’s report also brings positive news regarding inflation. The Fund projects inflation in Pakistan to drop to 5.1% for the ongoing fiscal year, a sharp decline from the 10% level previously expected. This easing of inflationary pressures is attributed to a combination of factors, including declining global commodity prices and effective monetary policies.
However, the IMF cautions that inflation is forecast to edge up to 7.7% in the next fiscal year, highlighting the need for continued vigilance in managing price stability.
External Account Shows Improvement
The IMF’s report indicates a significant improvement in Pakistan’s external account. The current account deficit is expected to narrow to just $400 million, or 0.1% of GDP, compared to an earlier projection of 1%. For the next fiscal year, the current account deficit is projected to widen slightly to 0.4% of GDP.
This improvement is attributed to a combination of factors, including curbed imports and a slight rebound in export performance. However, the IMF notes that the improvement comes primarily from reduced imports rather than a substantial increase in exports, leaving the economy vulnerable to external shocks.
Global Economic Context
The IMF’s report also provides insights into the global economic outlook. The global financial institution projects global growth to hover between 2.4% and 2.8% this year, citing continued monetary tightening in advanced economies and geopolitical tensions as key risks to the broader outlook.
These global economic conditions present both challenges and opportunities for Pakistan as it navigates its economic recovery.
