IMF raises Pakistan inflation forecast to 9.9%, keeps growth at 3.5% below government's 4% target

Key takeaways

• The IMF's World Economic Outlook (WEO), released on 13 October at the start of the World Bank-IMF Annual Meetings in Bangkok, puts Pakistan's FY2026-27 inflation at 9.9%, up from 8.4% in its April forecast.
• Growth is kept at 3.5%, below the government's 4% target and the World Bank's 3.8% forecast from last month.
• The current account is projected to move into a deficit of 1% of GDP (about $4.4 billion).
• Global growth is forecast at 3.1% in 2026 and 3.4% in 2027, broadly unchanged from April.
• The IMF warns that the risks are mostly on the downside, mainly from the Middle East conflict and energy prices.

Pakistan in numbers

Figures from Dawn, The Express Tribune and Profit, based on the WEO.

Why inflation was revised up

The IMF gave no Pakistan-specific reason for the higher inflation forecast. However, it raised inflation projections across the Middle East and Central Asia region because the conflict there has disrupted energy supply and pushed up prices.

The Express Tribune and Profit reported that the government has been passing higher fuel prices on to consumers while paying Rs2,000 a month to motorcyclists and Rs3,000 to small-car owners in compensation. They said the IMF had objected to that scheme as broad and costly. Geo News separately reported that the IMF has urged countries to keep subsidies narrow and targeted.

Both papers said a higher inflation forecast could add pressure to keep interest rates tight, though the WEO itself does not set a rate requirement for Pakistan.

What the government says

Finance Minister Muhammad Aurangzeb has said he still expects growth above 4%. "I am still quite clear that we should clock north of 4%," he told Reuters, as quoted by The Express Tribune and Profit.

Dawn noted that the IMF did not explain why it expects unemployment to fall while also projecting higher inflation and a wider current account deficit.

The global picture

• The IMF says the world economy held up better than expected in the first half of 2026, helped by strong investment in artificial intelligence and technology.
• Global inflation is projected to rise to 4.7% in 2026 before easing to 4.1% in 2027, mainly because of commodity prices.
• Growth in the Middle East and Central Asia is forecast to fall to 0.3% in 2026, then rebound to 6.3% in 2027. According to Profit, this assumes a long closure of the Strait of Hormuz followed by recovery once it reopens.
• The IMF warned that dwindling energy stocks and new geopolitical shocks could quickly feed into prices and supply.

What to watch

• Pakistan's monthly inflation figures and the State Bank's next interest-rate decision.
• The IMF executive board's approval of Pakistan's next loan tranche. The Express Tribune said this is tentatively expected in late November, when the staff report will be published.
• Fuel prices and any changes to the fuel subsidy scheme.

This article is for general information only and is not financial advice.