The International Monetary Fund (IMF) has raised its inflation forecast for Pakistan to 9.9 percent for the current fiscal year while keeping its growth projection at 3.5 percent, a position that falls short of the targets of 8.2 percent inflation and 4 percent growth.
The figures appear in the World Economic Outlook (WEO), released on Tuesday on the sidelines of the annual meetings. The staff-level report of the IMF will be made public only after its executive board approves the loan tranches, tentatively in late November.
In April, the Fund had projected inflation at 8.4 percent for fiscal year 2026-27 and maintained that figure in July. It has given no Pakistan-specific reason for the revision.
However, it also raised inflation projections for the Middle East and Central Asia region, citing the ongoing conflict that has disrupted energy supply and prices. The report noted that global headline inflation rose in August as energy prices rebounded after a short-lived ceasefire in the Middle East.
During the recent staff-level talks, the federal government and the central bank maintained that Pakistan would meet its annual targets despite inflationary pressures. Pakistani authorities also tried to convince the IMF that the 4 percent growth target would be achieved.
In an interview with Reuters, Finance Minister Muhammad Aurangzeb said he was “quite clear” that growth would be north of 4 percent. The 9.9 percent projection suggests the IMF may seek higher interest rates to contain inflation.
The government is fully passing on fuel price increases to consumers, in addition to levying heavy taxes. It has offered Rs2,000 per month in compensation to motorcyclists and Rs3,000 to small car owners. The IMF has objected to the scheme, describing it as broad and costly.
The Fund also projected a slightly higher current account deficit of 1 percent of GDP, or about $4.4 billion, which is around $450 million more than its previous estimate.
Separately, Planning Minister Ahsan Iqbal has recommended an eight-point Growth-Compatible Fiscal Stabilisation Framework to Prime Minister Shehbaz Sharif. In a memo last month, he wrote that Pakistan was achieving fiscal stabilisation by compressing development expenditure and borrowing more, rather than expanding the revenue base and increasing exports.
He added that the electorate would judge the government on the economy it experiences in 2029, including growth, employment, income, investment, exports, inflation, energy costs and economic opportunity.
Pakistan has been under a prolonged stabilisation phase through three IMF programmes, which the World Bank has cited as one reason for higher poverty in the country.