The International Monetary Fund (IMF) announced on Tuesday that it has lowered Pakistan’s growth forecast to a modest 2.6% for the current fiscal year. This adjustment comes alongside a revision of global economic projections, largely influenced by the uncertainty surrounding US President Donald Trump’s trade tariffs.
In its April 2025 World Economic Outlook report, the IMF revised Pakistan’s growth estimate down from 3% to 2.6%. This makes it the second major international financial institution to downgrade the country’s growth outlook for the fiscal year 2024-25.
This new forecast is a significant dip from the 3.6% growth target that the Pakistani government had set for the fiscal year. Looking ahead, the IMF anticipates that Pakistan’s economic growth will bounce back to 3.6% in the following fiscal year.
On a brighter note, the IMF has improved its inflation outlook for Pakistan, reducing it from nearly 10% to 5.1%. They expect inflation to stabilize at around 7.7% in the next fiscal year. Additionally, the IMF has revised its projection for Pakistan’s current account deficit, lowering it from nearly 1% of GDP to just 0.1%.
Previously, the IMF had anticipated that Pakistan’s current account deficit would widen to $3.7 billion, but now it expects that figure to drop to about $400 million for this fiscal year. For the next fiscal year, the current account deficit is projected to be just 0.4% of the economy’s size.
The IMF is set to unveil the detailed background of its updated projections in the upcoming staff level report for the country, which will be released after the IMF board gives the green light for the second loan tranche next month.
On Monday, Finance Minister Muhammad Aurangzeb had a meeting with IMF Managing Director Kristalina Georgieva in Washington.
A recent handout from the Finance Ministry shared that Aurangzeb expressed gratitude to the IMF team for successfully reaching a Staff-Level Agreement on the First Review under the Extended Fund Facility (EFF) and for establishing a new arrangement under the Resilience and Sustainability Facility (RSF).
Aurangzeb also reaffirmed the Pakistan government’s dedication to keeping the reform momentum going and extended an invitation from Prime Minister Shehbaz Sharif for Georgieva to visit Pakistan, according to the Finance Ministry.
Additionally, the finance minister met with Robert Kaproth, the Assistant Secretary of the US Treasury Department, where he updated him on the positive trends in Pakistan’s macroeconomic indicators. He emphasized the ongoing reforms in areas like taxation, energy, privatization, state-owned enterprises (SOEs), pensions, and debt management.
In an interview with Bloomberg in Washington on Tuesday, Finance Minister Aurangzeb mentioned that Pakistan is aiming to increase its imports from the US and is working to eliminate non-tariff barriers to navigate around the high tariffs imposed by President Donald Trump.
The IMF has projected that global economic growth for 2025 will fall between 2.4% and 2.8%, largely due to the uncertainty stemming from President Trump’s trade policies.
The rapid rise in trade tensions has created a lot of policy confusion, making it tougher than usual to pin down a clear global growth forecast, according to the IMF report.
Because of this uncertainty, the World Economic Outlook offers a range of global growth predictions. The baseline forecast, which is based on measures announced on April 4, suggests that global growth could dip to 2.4%.
After April 9, model-based forecasts were utilized to assess the impact of the announced pause and the additional exemptions, along with the rising tariff rates between China and the United States. As a result, economic growth is now projected to be around 2.8%.
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Q1.Why was Pakistan’s growth forecast revised to 2.6%?
A global financial institution lowered Pakistan’s projected growth rate from 3% to 2.6% for the fiscal year 2024-25. This revision comes amid broader global economic uncertainty, particularly due to international trade tensions.
Q2.How does this compare with Pakistan’s original growth target?
Pakistan had originally targeted 3.6% economic growth for the current fiscal year. The new projection represents a 1% shortfall from the government’s goal.
Q3.Will Pakistan’s economy recover in the coming year?
Yes, the global financial body expects Pakistan’s growth to bounce back to 3.6% in the next fiscal year, assuming current reforms and positive trends continue.
Q4.What is the inflation outlook for Pakistan?
The inflation rate has been revised downward from nearly 10% to 5.1%, with expectations of stabilization around 7.7% next fiscal year.
Q5.What changes were made to Pakistan’s current account deficit forecast?
Pakistan’s current account deficit is now expected to be only 0.1% of GDP, a significant drop from previous forecasts of nearly 1%. In dollar terms, it’s projected to decline from $3.7 billion to just $400 million.
Q6.What reforms are being undertaken by the Pakistani government?
Key reforms are being pursued in taxation, energy, privatization, state-owned enterprises (SOEs), pensions, and debt management. These efforts are crucial for sustainable long-term growth.
