ISLAMABAD: The International Monetary Fund (IMF) has revised Pakistan’s economic growth forecast upward to 3.6% for the ongoing fiscal year, while cautioning that recent severe flooding in Q3 2025 may negatively impact growth, inflation, and the current account beyond present expectations, The News reported on Wednesday.
In its Regional Economic Outlook for the Middle East and Central Asia, the IMF noted that while inflation in Pakistan has decelerated significantly this year due to lower food and energy prices, it is expected to rise again in 2026.
This anticipated increase is attributed to the normalisation of prices and the phasing out of short-term electricity subsidies.
Pakistan’s growth is projected to increase to 3.6% in 2026, supported by steady reform implementation, improving financial conditions and growing confidence.
This revised figure is an improvement on the Fund’s earlier projection of 3.25% to 3.5% for FY26, which was announced last week after a staff-level agreement was reached with Pakistan under the existing Extended Fund Facility (EFF) and Resilience Sustainability Facility (RSF). Pakistan’s GDP grew by 3.04% in the last financial year, 2024-25.
The report highlighted that in Middle East and North Africa, Afghanistan, and Pakistan (MENAP) oil-importing nations, cyclically adjusted primary fiscal balances are projected to improve. This is due to tax policy and administration reforms helping to mobilise revenues in countries like Egypt, Jordan, Morocco, and Pakistan, while energy subsidy reforms help contain spending in Egypt, Morocco, and Pakistan.
The IMF also cautioned that higher borrowing costs could exacerbate fiscal and financial vulnerabilities across the region, particularly in economies with high projected government gross financing needs and banking sectors holding large shares of sovereign bonds, such as Algeria, Egypt and Pakistan.
Since 2020, the Fund has approved $55.7 billion in financing for countries across the MENAP and CCA regions. A significant portion, $21.4 billion, has been approved since early 2024 for programmes in Egypt, Jordan, Morocco, and Pakistan.
Beyond financing, the IMF has delivered more than 385 technical assistance and capacity development projects across 31 countries in these regions, amounting to $36.8 million during the fiscal year 2024/25.
The report stated that economic performance in the Middle East and Central Asia has shown resilience so far in 2025, despite elevated global uncertainty and regional geopolitical tensions.
Growth in the Middle East and North Africa is projected to strengthen gradually, supported by oil output, strong demand, and reforms, while growth in the Caucasus and Central Asia is expected to slow to a more sustainable pace.
The outlook, however, faces risks from weaker global demand, tighter financial conditions, renewed geopolitical instability and climate shocks. The IMF concluded that fiscal prudence, structural reforms and stronger policy frameworks are essential to sustaining durable growth.