ISLAMABAD: The International Monetary Fund (IMF) has raised Pakistan’s GDP growth forecast to 3.6 percent for the current fiscal year but warned that severe flooding in the third quarter of 2025 could negatively impact growth, inflation, and the current account.
In its Regional Economic Outlook for the Middle East and Central Asia, the IMF said inflation in Pakistan has eased this year due to lower food and energy prices. However, it is expected to rise again in 2026 as temporary electricity subsidies end and prices return to normal levels.
The IMF projected Pakistan’s growth to remain at 3.6 percent in 2026, supported by ongoing reforms, better financial conditions, and improving investor confidence.
This is slightly higher than the Fund’s earlier estimate of 3.25 to 3.5 percent for FY26, announced after a staff-level agreement with Pakistan under the Extended Fund Facility (EFF) and Resilience Sustainability Facility (RSF). The country’s GDP grew by 3.04 percent in FY2024-25.
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The report noted that in oil-importing countries of the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region, fiscal balances are expected to improve due to tax reforms and better revenue collection in countries including Pakistan, while energy subsidy reforms are helping reduce spending.
However, the IMF warned that rising borrowing costs could increase fiscal and financial risks in countries with high public debt and large government financing needs, including Pakistan, Egypt, and Algeria.
Since 2020, the IMF has provided $55.7 billion in financial support to countries in the MENAP and Central Asia regions.
Of this, $21.4 billion has been approved since early 2024 for programmes in Egypt, Jordan, Morocco, and Pakistan. The Fund has also completed more than 385 technical assistance and capacity-building projects worth $36.8 million in 31 countries during FY2024-25.
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The IMF said the Middle East and Central Asia region has remained resilient in 2025 despite global uncertainty and geopolitical tensions.
Growth in the Middle East and North Africa is expected to rise gradually due to strong demand, oil production, and reforms, while growth in the Caucasus and Central Asia is forecast to ease to a more sustainable pace.
The Fund warned that risks remain due to weaker global demand, tighter financial conditions, regional instability, and climate-related shocks.
It emphasized that fiscal discipline, structural reforms, and stronger policy frameworks are vital to ensure long-term and stable growth.
