ISLAMABAD: The International Monetary Fund has raised its inflation forecast for Pakistan to 9.9% for the current fiscal year, while keeping its economic growth projection unchanged at 3.5%.
The revised estimates suggest the IMF does not share the government’s more optimistic expectations of lower inflation and stronger economic growth.
The projections were published on Tuesday in the IMF’s latest World Economic Outlook report.
In April, the Fund had projected inflation in Pakistan at 8.4% for fiscal year 2026-27, a forecast it maintained in its July update. The latest report, however, raises that estimate to 9.9%.
The IMF did not provide Pakistan-specific reasons for the higher inflation projection. However, it also increased inflation forecasts for the Middle East and Central Asia, citing the ongoing conflict in the Middle East and its impact on energy supplies and prices.
The new inflation estimate is also above the government’s official target of 8.2%.
During recent review talks, the federal government and the State Bank of Pakistan had expressed confidence that the annual inflation target could still be achieved despite continued price pressures.
The higher IMF projection could, however, bring renewed attention to the possibility of tighter monetary policy and higher interest rates if inflationary pressures persist.
The government is currently passing on increases in global fuel prices to domestic consumers, while petroleum products also remain subject to heavy taxation.
It has also introduced a compensation scheme offering Rs2,000 per month to motorcycle users and Rs3,000 to owners of small cars. The IMF has objected to the scheme, describing it as broad-based and potentially costly.
On economic growth, the IMF kept Pakistan’s projection unchanged at 3.5% for the current fiscal year.
Pakistani authorities had sought to convince the Fund during review discussions that the economy could meet the government’s annual growth target of 4%.
Finance Minister Muhammad Aurangzeb had also said in an interview with a foreign news agency that he remained confident Pakistan’s economic growth could exceed 4%.
Pakistan has been operating under successive IMF programmes in recent years as part of efforts to stabilise the economy.
According to the World Bank, measures adopted to restore economic stability, including cuts in development spending, have also contributed to an increase in poverty.
The IMF also raised its forecast for Pakistan’s current account deficit to 1% of gross domestic product, equivalent to around $4.4 billion.