ECONOMIC DESK
ISLAMABAD: The International Monetary Fund (IMF) has raised Pakistan’s economic growth projection for the current fiscal year to 3.6 per cent, reflecting optimism over the country’s reform progress and improving financial indicators. However, the Fund also warned that the recent severe floods during the third quarter of 2025 could derail momentum by impacting growth, inflation, and the current account balance.
In its latest Regional Economic Outlook, the IMF noted that inflation in Pakistan has eased significantly in 2025, mainly due to declining food and energy prices. Yet, it expects inflationary pressures to resurface in 2026 as temporary relief measures—such as electricity subsidies—are phased out and price levels normalize.
The Fund anticipates Pakistan’s economy to expand further in 2026, maintaining a 3.6 per cent growth rate, supported by consistent reform implementation, improved market sentiment, and better access to financing. This marks an upward revision from its earlier projection of 3.25 to 3.5 per cent, announced last week following the staff-level agreement with Pakistan under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF). Pakistan’s GDP grew by 3.04 per cent in FY2024-25.
Highlighting broader regional trends, the IMF report said that fiscal positions among Middle East, North Africa, Afghanistan, and Pakistan (MENAP) oil-importing countries are expected to strengthen. The improvement stems from ongoing tax and energy subsidy reforms, which are helping countries like Pakistan, Egypt, Jordan, and Morocco to mobilize revenues and contain expenditures.
Nonetheless, the IMF warned that persistently high borrowing costs may aggravate fiscal and financial vulnerabilities in countries with heavy debt obligations and banking sectors deeply exposed to sovereign bonds—particularly Algeria, Egypt, and Pakistan.
Since 2020, the IMF has approved $55.7 billion in financial support for nations across the MENAP and Central Asia regions. Of this, $21.4 billio was sanctioned since early 2024 for programmes in Egypt, Jordan, Morocco, and Pakistan. In addition to funding, the Fund carried out over 385 technical assistance and capacity development projects worth $36.8 million during FY2024-25 across 31 regional economies.
According to the report, the Middle East and Central Asia have shown notable resilience in 2025 despite persistent global uncertainty and regional conflicts. Growth in the Middle East and North Africa is expected to gain strength, supported by oil production, robust demand, and structural reforms, while expansion in the Caucasus and Central Asia is likely to moderate to more sustainable levels.
Still, the IMF cautioned that the region’s outlook remains vulnerable to external shocks, including weaker global demand, tighter financing conditions, ongoing geopolitical tensions, and climate-related disasters. It emphasized that sustained economic growth would depend on fiscal discipline, deep structural reforms, and strengthened policy frameworks.
Read more:https://nayakashmir.com/imf-cautions-pakistan-floods-to-hamper-growth-revive-inflationary-pressures/
