IMF predicts positive economic momentum for Pakistan despite inflation pressures

The International Monetary Fund (IMF) has released its latest assessment of Pakistan’s economic outlook, highlighting several encouraging indicators for the country’s financial stability and growth over the coming years.

Although the IMF noted the possibility of rising inflation—projecting the rate to range between 4.5% and 6.3%, potentially reaching 8.9% by June 2026—the broader economic picture shows promising improvements. Inflation stood at 3.2% in June 2025, marking a manageable baseline for future adjustments.

In its review of the past two years and projections for the current fiscal cycle, the IMF stated that Pakistan’s economic growth rate is expected to reach 3.2%, signalling gradual but steady recovery. One of the most encouraging signs is the anticipated improvement in the job market, with the unemployment rate projected to drop from 8% to 7.5%.

Tax collection is also expected to strengthen. The IMF forecasts that the tax-to-GDP ratio will rise to 16.3% in FY 2026, up from 15.9% in FY 2025, reflecting ongoing efforts to broaden the revenue base and improve fiscal management.

Fiscal stability is set to improve as well. The Fund estimates that the fiscal deficit will decline to 4% in FY 2026, compared to 5.4% in FY 2025, while the country’s debt burden is also projected to ease slightly—moving from 70.6% of GDP in 2025 to 69.6% in 2026. Foreign debt is expected to remain stable at 22.5% of GDP.

Despite a slight dip in overall investment—from 0.6% of GDP in 2025 to a projected 0.5% in 2026—Pakistan’s foreign exchange reserves are forecast to strengthen significantly. Reserves could rise to $17.8 billion in FY 2026, up from $14.5 billion in 2025, improving the country’s external buffers and financial resilience.

Overall, the IMF’s analysis points toward a cautiously optimistic economic trajectory for Pakistan, with improving fiscal indicators, stronger reserves, and increased growth offering a foundation for continued stability and reform.