IMF slashes Pakistan’s growth forecast to 3.5pc amid Middle East conflict risks

ISLAMABAD: The International Monetary Fund (IMF) has lowered Pakistan’s GDP growth forecast for the next fiscal year to 3.5 per cent, citing rising global uncertainty triggered by tensions in the Middle East and the ongoing Iran war.

In its latest World Economic Outlook report, the IMF said the conflict is disrupting global growth and slowing disinflation, with emerging markets expected to face the most pressure.

According to the report, Pakistan’s economy is projected to expand by 3.5 per cent in fiscal year 2026–27, down from earlier estimates.

The Fund also warned that inflation in Pakistan could rise to 8.4 per cent in the same period, reflecting spillover effects from higher global energy prices.

The IMF noted that Pakistan is particularly exposed to developments in the Middle East due to its heavy reliance on energy imports from the region.

It added that disruptions in oil and commodity markets linked to the conflict are feeding into inflationary pressures worldwide.

For the current fiscal year, however, the IMF maintained its growth forecast at 3.6 per cent.

The global lender also downgraded broader economic outlooks, warning that prolonged instability in the Middle East could further weaken global growth, increase inflation, and strain fiscal balances across developing economies.

Officials cautioned that energy price shocks and supply chain disruptions remain key risks, with the outlook dependent on how long geopolitical tensions persist.