ISLAMABAD: The International Monetary Fund (IMF) has projected Pakistan’s inflation rate at 9.9% for the current fiscal year. The forecast exceeds the government’s target of 8.2%.
The Fund has maintained its economic growth forecast at 3.5%. This falls short of the government’s target of 4% for the current fiscal year.
However, Finance Minister Muhammad Aurangzeb remains optimistic. He expects Pakistan’s economy to grow by more than 4%.
Inflation and External Account Pressures
The higher inflation forecast raises concerns about mounting price pressures. It could also affect the State Bank of Pakistan’s monetary policy decisions, including its interest rate outlook.
Meanwhile, the ongoing Middle East conflict poses another risk. Any rise in global energy prices could add to inflationary pressures at home.
The IMF has also revised its estimate for Pakistan’s current account deficit. It now expects the deficit to reach 1% of gross domestic product (GDP), equivalent to around $4.4 billion.
These projections highlight the challenges facing Pakistan. The country must contain inflation, sustain economic growth and maintain stability in its external accounts.
Read more: IMF, Pakistan Reach Staff-Level Agreement for $1.2 Billion Tranche
Pakistan and IMF Reach Staff-Level Agreement
On October 8, Pakistan and the IMF reached a staff-level agreement on the fourth review of the country’s $7 billion Extended Fund Facility (EFF).
The agreement still requires approval from the IMF Executive Board. Once approved, Pakistan will receive approximately $1 billion under the EFF and another $210 million through the Resilience and Sustainability Facility (RSF).
In its statement following the review talks, the IMF said Pakistan’s economic programme remained broadly on track despite external pressures, including the impact of the Middle East conflict.
The Fund estimated that Pakistan’s economy grew by 3.6% in fiscal year 2026. It also reported real GDP growth of 4% during the first three quarters.
According to the statement, Pakistan’s inflation rate reached its highest level in May 2026. Strong remittances from overseas Pakistanis, however, helped keep the current account deficit under control.
IMF Urges Gradual Phase-Out of Petrol Subsidy
The IMF has also called on the government to gradually phase out the prime minister’s petrol subsidy scheme.
The Fund urged authorities not to expand the programme further. Instead, it recommended restricting the subsidy to eligible beneficiaries.
The latest projections underline the need to balance inflation control with economic growth. Pakistan must also manage external pressures as it continues its IMF-supported reform programme.
