IMF Warns of Rising Inflation in Pakistan as Fresh Economic Outlook Released

The International Monetary Fund (IMF) has projected an increase in Pakistan’s inflation over the coming years, according to an official assessment reported by ARY News on Wednesday. The financial institution cautioned that inflation could rise from the current 4.5 percent to 6.3 percent, potentially touching 8.9 percent by June 2026.

In its updated economic forecast, the IMF estimated that Pakistan’s GDP growth will remain moderate, reaching 3.2 percent during the ongoing fiscal year. The Fund noted that although economic recovery is underway, structural challenges continue to pressure long-term stability.

The report indicates slight improvement in the job market, predicting that the unemployment rate will ease from 8 percent to 7.5 percent. However, the IMF emphasized that sustained reforms are necessary to support employment at a broader scale.

Fiscal indicators shared in the report show a positive trajectory. The tax-to-GDP ratio is expected to improve to 16.3 percent in FY2026 from 15.9 percent in FY2025, reflecting enhanced revenue measures and compliance efforts.

Read More : Weekly inflation in Pakistan shows clear decline

The IMF expects Pakistan’s fiscal deficit to reduce to 4 percent, compared with 5.4 percent recorded last year. Despite the improvement, the country’s public debt burden is projected to remain elevated at 69.6 percent of the GDP.

According to the IMF, Pakistan faces a dual challenge: tackling rising prices while safeguarding economic growth and ensuring fiscal discipline. The report highlights the importance of steady reforms to maintain macroeconomic balance.

Earlier this week, the IMF Executive Board approved a $1.2 billion disbursement for Pakistan under its Extended Fund Facility (EFF) and the climate-focused Resilience and Sustainability Facility (RSF). The Fund confirmed that the amount will be released immediately, acknowledging Pakistan’s timely implementation of economic and energy sector reforms.