IMF Predicts Higher Inflation and Slower GDP Growth for Pakistan

The International Monetary Fund has revised Pakistan’s macroeconomic outlook following approval of the third review, lowering the country’s projected economic growth for fiscal year 2026-27 while raising inflation and external account expectations.

According to the IMF’s revised projections, Pakistan’s GDP growth forecast for FY27 has been cut to 3.5 percent from the earlier estimate of 4.1 percent. At the same time, inflation expectations for FY27 were raised to 8.4 percent from 7 percent previously.

The IMF also revised Pakistan’s current account outlook, projecting the deficit at 0.9 percent of GDP for FY27 compared with its earlier estimate of 0.4 percent.

Foreign exchange reserve projections were also lowered, with reserves now expected to reach $20.9 billion by the end of FY27 instead of the earlier forecast of $23.3 billion.

For FY26, the IMF revised Pakistan’s GDP growth estimate upward to 3.6 percent from 3.2 percent earlier. Inflation expectations for the current fiscal year were also increased to 7.2 percent from 6.3 percent previously.

Despite the weaker economic outlook, the government has maintained its commitment to fiscal discipline. The IMF projections showed the primary surplus target remains unchanged at 2 percent of GDP for FY27, while the FY26 target also stayed at 1.6 percent.

IMF’s revised projections broadly align with its own recent assessment on Pakistan’s economy, particularly regarding the impact of rising global oil prices and external sector pressures.

Higher oil prices could lead to slower economic growth, elevated inflation, pressure on the current account, and lower reserve accumulation, while forcing the government to continue maintaining a tight fiscal policy stance.