ISLAMABAD: The International Monetary Fund (IMF) has projected Pakistan’s inflation rate at 9.9% for the current fiscal year, exceeding the government’s target of 8.2%, while maintaining its economic growth forecast at 3.5%.
The IMF’s growth projection falls short of the government’s target of 4% for the current fiscal year. However, Finance Minister Muhammad Aurangzeb remains optimistic that Pakistan’s economic growth will exceed 4%.
The higher inflation forecast has raised concerns about mounting price pressures and could put additional pressure on the State Bank of Pakistan’s monetary policy decisions, including its interest rate outlook.
Inflation risks have also increased amid concerns that the ongoing conflict in the Middle East could drive up energy prices, adding to domestic inflationary pressures.
Meanwhile, the IMF has raised its estimate for Pakistan’s current account deficit to 1% of gross domestic product (GDP), equivalent to approximately $4.4 billion.
The revised projections highlight the economic challenges facing Pakistan as it seeks to control inflation, sustain growth and maintain stability in its external accounts.
Read more: IMF, Pakistan reach staff-level agreement for $1.2bln tranche
On October 8, Pakistan and the International Monetary Fund (IMF) reached a staff-level agreement on the fourth review of the $7 billion Extended Fund Facility (EFF).
The agreement, reached after discussions between IMF officials and Pakistani authorities, 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).
According to an official statement from the IMF after review talks. the international lender said Pakistan’s economic programme remained broadly on track despite external pressures, including the impact of the Middle East conflict. It estimated that the economy grew by 3.6 per cent in fiscal year 2026, while real GDP growth reached 4 per cent during the first three quarters.
Pakistan’s inflation rate also reached its highest level in May 2026, according to the statement.
The statement noted that strong remittances from overseas Pakistanis helped keep the country’s current account deficit under control.
The IMF has also called for the gradual phasing out of the Prime Minister’s petrol subsidy scheme, while urging the government not to expand the programme further. The Fund recommended that the subsidy be restricted to eligible beneficiaries.