IMF raises Pakistan’s inflation forecast to 9.9%, keeps growth at 3.5%
The IMF has raised Pakistan’s inflation forecast to 9.9% for FY27 from 8.4%, while maintaining its growth projection at 3.5%, below the government’s 4% target.
The International Monetary Fund (IMF) has raised Pakistan’s inflation forecast to 9.9% for fiscal year 2026-27 while maintaining its economic growth projection at 3.5%, putting both estimates at odds with the government’s targets.
According to the IMF’s latest World Economic Outlook, released on October 13, the projected inflation rate is 1.5 percentage points higher than the Fund’s previous estimate of 8.4%. The earlier forecast was issued in April and retained in July.
The revised projection exceeds the government’s inflation target of 8.2%, while the growth estimate falls short of its 4% target.
The IMF did not provide a Pakistan-specific explanation for the inflation revision. However, the higher forecast comes amid energy supply disruptions and rising international fuel prices linked to the ongoing conflict in the Middle East.
Pakistan remains exposed to higher international energy costs because of its reliance on imported fuel. Rising oil prices can increase transportation, electricity and production expenses, putting additional pressure on households and businesses.
The government has introduced monthly financial assistance of PKR 2,000 for motorcyclists and PKR 3,000 for small-car owners to provide relief from higher fuel costs. The IMF has raised concerns about the broad coverage and cost of the relief scheme.
The higher inflation forecast could complicate efforts to contain prices and influence monetary policy decisions. However, the revised outlook does not prescribe a specific interest rate for Pakistan.
Growth outlook remains below government target
The IMF has kept its economic growth forecast at 3.5% for FY2026-27, despite the government’s target of 4%.
Finance Minister Muhammad Aurangzeb has expressed confidence that the economy will grow by more than 4% during the fiscal year.
The difference between the two projections highlights uncertainty over the pace of Pakistan’s economic recovery as the government continues implementing reforms under its IMF-supported programme.
Pakistan also faces the challenge of balancing economic growth with price stability and external financing needs. Higher energy import costs could put additional pressure on the country’s external accounts if global supply disruptions persist.
The revised projections underline the challenges facing policymakers as they seek to control inflation while supporting economic activity.
