WASHINGTON: The International Monetary Fund (IMF) has sounded the alarm over the economic fallout of Pakistan’s recent floods, warning that the natural disaster could stall growth, stoke inflation, and place additional pressure on the country’s external accounts.
In its latest ‘Middle East and Central Asia Regional Economic Outlook’, the IMF projected Pakistan’s GDP growth for the ongoing fiscal year to slow to 3.6 percent, below the government’s 4.2 percent target. The report attributes the expected slowdown to the widespread damage caused by flooding during the third quarter of 2025.
The Fund noted that the floods have severely affected agriculture, infrastructure, and household incomes, aggravating inflationary trends and widening the current account deficit**. “Economic growth, inflation, and the external balance are all likely to suffer in the aftermath of the floods,” the IMF warned, adding that the full extent of the economic losses remains uncertain.
While acknowledging ongoing recovery efforts, the report said that Pakistan’s macroeconomic outlook remains delicate, with rising prices once again threatening monetary stability.
The IMF further cautioned that inflation could rebound this year due to several factors, including the withdrawal of electricity subsidies, tariff adjustments, and supply chain disruptions stemming from flood-related damages.
Pakistan had previously managed to bring inflation under control through a strict monetary policy, but the recent disaster risks reversing that progress, particularly by driving up prices of food and energy.
Despite these challenges, the IMF recognized Pakistan’s continued commitment to economic reforms and fiscal discipline, suggesting that sustained policy implementation could gradually strengthen the economy.
The lender projected that, with consistent reform momentum, economic growth could rise to 4.5 percent by 2030. However, it emphasized that policy continuity, fiscal responsibility, and structural resilience are essential to cushion future climate shocks and ensure long-term economic stability.
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