IMF projects inflation rise in Pakistan amid new economic outlook
The International Monetary Fund has issued a fresh warning about Pakistan’s economic outlook as the lender’s latest report shows inflation is expected to rise sharply in the coming months, with the global financial institution projecting a jump from 4.5 per cent to 6.3 per cent, potentially climbing as high as 8.9 per cent by June 2026, reported on Wednesday. The new forecast comes as the IMF continues to monitor Pakistan’s economic reform programme, urging stability measures amid persistent inflationary pressures.
Alongside higher price levels, the IMF projects Pakistan’s economy to grow by 3.2 per cent during the ongoing fiscal year, signalling modest recovery despite structural challenges. The unemployment rate is expected to ease slightly, declining from 8 per cent to 7.5 per cent as economic activity shows gradual improvement.
On the fiscal front, the IMF estimates that Pakistan’s tax-to-GDP ratio will rise from 15.9 per cent in FY2025 to 16.3 per cent in FY2026, reflecting efforts to boost revenue and strengthen the country’s tax base. The fiscal deficit is forecast to narrow to 4 per cent compared with 5.4 per cent last year, though the country’s overall debt remains a significant concern, projected at a high 69.6 per cent of GDP.
The IMF’s report underscores Pakistan’s dual challenge of managing inflation while ensuring growth momentum and fiscal discipline. Economists have warned that the anticipated rise in inflation could intensify pressure on households and businesses, especially as the government implements reforms in the energy and tax sectors.
Earlier this week, the IMF Executive Board formally approved $1.2 billion for Pakistan under a dual-track bailout programme combining the 37-month Extended Fund Facility and the climate-centric Resilience and Sustainability Facility. The approval followed a board meeting in Washington on Monday, with the lender noting that Pakistan had implemented key economic and energy reforms on time.
According to the IMF, the newly approved tranche will be transferred immediately, offering short-term relief to the government as it navigates rising prices, fiscal constraints, and commitments under the ongoing reform agenda. The combined bailout is expected to support Pakistan’s external financing needs while advancing climate resilience and long-term sustainability initiatives.
The IMF’s latest economic outlook highlights the pressing need for consistent policy action as Pakistan balances inflationary pressures with the broader goal of economic stabilization.
