Inflation likely to reach 9.9% in Pakistan, IMF maintains growth forecast

The International Monetary Fund (IMF) has projected that Pakistan's inflation rate will rise to 9.9 percent in the current fiscal year, while maintaining its forecast for the country's economic growth at 3.5 percent. This new inflation forecast exceeds the government's target of 8.2 percent.

The IMF presented these estimates in its latest *World Economic Outlook* report, released on Tuesday. Previously, in its April and July reports, the institution had projected Pakistan's inflation rate at 8.4 percent for the 2026-27 fiscal year; however, the latest report has raised this figure to 9.9 percent.

Why are concerns regarding rising inflation significant?

The IMF did not specify the exact reasons for raising the inflation forecast for Pakistan; however, inflation estimates for the Middle East and Central Asia have also been increased due to the ongoing conflict in the Middle East and its potential impact on global market prices, including energy supplies.

During recent review talks with the IMF, the government and the State Bank had expressed confidence in achieving the annual target despite inflationary pressures. Following this new forecast, attention may shift toward the possibility of further tightening monetary policy and raising interest rates to keep prices under control.

Fuel prices and government subsidy schemes

The government is passing the burden of rising global fuel prices on to domestic consumers, while also levying heavy taxes on fuel. In this context, a compensation scheme has been introduced offering 2,000 rupees per month to motorcyclists and 3,000 rupees to owners of small vehicles.

However, the IMF has objected to this relief plan, describing it as too broad in scope and likely to entail excessive costs.

Will economic growth exceed 4 percent?

Despite raising its inflation forecast, the IMF has not altered its projection of 3.5 percent for Pakistan's economic growth rate. During review talks, Pakistani officials had attempted to convince the institution that the country could achieve an annual growth target of 4 percent.

Finance Minister Muhammad Aurangzeb also stated in an interview with a foreign news agency that he still expects Pakistan's economic growth rate to surpass 4 percent.

For several years, Pakistan has been implementing various IMF programs to achieve economic stability. According to the World Bank, cuts in development spending—part of the policies adopted for economic stability—are among the factors contributing to rising poverty in the country.

Current account deficit projection also raised

The IMF has raised its projection for Pakistan's current account deficit to 1 percent of the Gross Domestic Product (GDP), amounting to approximately $4.4 billion.

According to the latest estimates, Pakistan will continue to face the dual challenges of curbing inflation and accelerating the pace of economic growth.