The International Monetary Fund (IMF) has lowered Pakistan’s economic growth forecast to 2.6% for the current fiscal year, down from an earlier estimate of 3%. This revision comes as global economic uncertainties, particularly trade tensions and tariffs, impact the country’s growth prospects.
IMF Lowers Growth Outlook for Pakistan
In its latest World Economic Outlook report, the IMF revised Pakistan’s growth rate projection, citing global tariff disputes, especially the reciprocal tariffs imposed by the U.S. under President Donald Trump. These measures, which affect several countries including Pakistan, have contributed to a weaker global economic environment.
Previously, in January 2025, the IMF had predicted Pakistan’s economic growth at 3% for the fiscal year. However, the latest estimate indicates that Pakistan will likely miss its growth target. The adjustment marks a significant downward revision from an earlier projection of 3.2%, made in October 2024.
Trade Tensions Contribute to Slower Growth
The IMF’s updated forecast underscores the negative impact of the ongoing trade tensions. The U.S. tariffs, which include duties on several Pakistan exports, have heightened global economic uncertainty. According to the IMF, these trade barriers are contributing to a slowdown in global economic output, which in turn is affecting Pakistan’s growth trajectory.
In addition to the economic slowdown, the IMF has expressed concerns over the global economic climate for 2025 and beyond. This has led to a broader reduction in growth forecasts for many countries, including Pakistan.
Pakistan’s Current Account Deficit Forecast Revised Downward
In a more positive update, the IMF revised down its forecast for Pakistan’s current account deficit. Initially expected to widen to $3.7 billion, the deficit is now expected to be just $400 million. This marks a notable improvement, suggesting that Pakistan’s external balance could stabilize despite the challenging global conditions.
Looking ahead, the IMF projects that Pakistan’s current account deficit will remain relatively low at 0.4% of GDP in the next fiscal year, 2025-26. This is a significant reduction compared to previous estimates and reflects a better-than-expected performance in Pakistan’s external accounts.
IMF’s Long-Term Projections for Pakistan
Despite the short-term revisions, the IMF’s outlook for Pakistan’s long-term growth remains cautiously optimistic. While the country faces immediate challenges from global trade dynamics, the IMF projects a gradual improvement in Pakistan’s economic indicators if the global trade situation stabilizes.
The IMF also cautioned that Pakistan must continue to focus on improving its domestic economic policies to maintain stability. Structural reforms, along with efforts to diversify exports and reduce dependence on imports, will be essential for fostering sustainable economic growth.
Global Economic Uncertainty Puts Pressure on Emerging Markets
Pakistan is not alone in facing the challenges posed by the ongoing trade tensions and global tariff disputes. Other emerging markets have also been affected by the uncertainty surrounding U.S. trade policies. However, Pakistan’s vulnerability is heightened due to its reliance on exports and foreign investments.
According to the IMF, the global economy will continue to experience volatility in the coming months, and countries like Pakistan must remain adaptable to external shocks. The IMF has recommended that Pakistan focus on strengthening its economic fundamentals to better weather these external challenges.
