IMF lowers Pakistan’s GDP growth forecast to 3.6 per cent for FY26

ISLAMABAD: The International Monetary Fund (IMF) has revised its growth forecast for Pakistan, projecting the country’s economy to expand by 3.6 per cent in the fiscal year 2025-26, lower than the government’s target of 4.2 per cent.

In its latest World Economic Outlook Update, titled Global Economy: Tenuous Resilience amid Persistent Uncertainty, the IMF also made a small upward revision to Pakistan’s estimated growth for the recently concluded fiscal year 2024-25. The estimate has been raised by 0.1 percentage point to 2.7 per cent.

The Finance Division, in its own monthly economic outlook for June 2025, had reported that Pakistan’s real GDP grew by 2.68 per cent during FY25.

Other international institutions have also released their forecasts for Pakistan’s economy. The World Bank expects a growth rate of 3.1 per cent in FY26, while the Asian Development Bank (ADB) has projected 3 per cent. The ADB also slightly revised its estimate for FY25, raising it to 2.7 per cent from its earlier forecast of 2.5 per cent.

On the global front, the IMF expects the world economy to grow by 3 per cent in 2025 and 3.1 per cent in 2026. These projections are slightly more optimistic than those issued in April, with upgrades of 0.2 and 0.1 percentage points respectively.

The IMF said the improved outlook is due to factors such as lower-than-expected US tariff rates, a weaker dollar, better financial conditions, and fiscal expansion in some major economies.

Global inflation is also projected to ease, falling to 4.2 per cent in 2025 and 3.6 per cent in 2026, roughly in line with previous forecasts. However, the report noted that inflation is likely to stay above target in the United States, while being more restrained in other major economies.

Despite these positive signs, the IMF warned that risks to the global economic outlook remain tilted to the downside, echoing concerns highlighted in its April report.

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