The International Monetary Fund has projected inflation in Pakistan at 9.9% for the current fiscal year, above the government’s 8.2% target. The lender also kept its growth forecast at 3.5%, which sits below the government’s 4% goal.
Finance Minister Muhammad Aurangzeb still expects economic growth to surpass 4%, despite the gap with the Fund’s estimate.
Price pressures and the central bank’s room to act
The steeper inflation outlook has sharpened concerns about rising prices. It may also weigh on State Bank of Pakistan decisions on monetary policy, including the direction of interest rates.
Risks to prices have grown as well, because the ongoing Middle East conflict could push energy costs higher and add to domestic inflation.
External accounts and the pending IMF loan review
The IMF has raised its estimate of the current account deficit to 1% of gross domestic product, roughly $4.4 billion. According to the Fund’s statement, strong remittances from overseas Pakistanis have helped keep that deficit under control.
On October 8, Pakistan and the IMF reached a staff-level agreement on the fourth review of the $7 billion Extended Fund Facility. The deal still needs approval from the IMF Executive Board. If it is cleared, Pakistan would receive about $1 billion under the facility and another $210 million through the Resilience and Sustainability Facility.
IMF assessment of growth and the petrol subsidy
In its official statement after the review talks, the IMF said Pakistan’s programme had stayed broadly on track, even with outside pressures such as the Middle East conflict. It estimated growth of 3.6% in fiscal year 2026, while real GDP growth reached 4% during the first three quarters.
The statement also said inflation hit its highest level in May 2026. The IMF has urged a gradual end to the Prime Minister’s petrol subsidy scheme, advising against expanding it and recommending that it be limited to eligible beneficiaries.
