IMF lowers GDP growth forecast to 2.6% for Pakistan

ISLAMABAD: The International Monetary Fund (IMF) has revised downward GDP growth for Pakistan to 2.6 percent for the outgoing fiscal year 2024-25 from the October projection of 3.2 percent, based on the weaker activity in first half (H1) and broader global uncertainty.

The Fund in its latest report “First review under the Extended Fund Facility (EFF) arrangement, requests for modification of performance criteria, and request for an arrangement under the Resilience and Sustainable Facility (RSF)”, noted;2.5 percent GDP growth in fiscal year 2024, growth slowed somewhat in H1, recording 1.3 percent and 1.7 percent (yoy) in fiscal year Q1 and Q2, respectively, reflecting lower yields from the major Kharif crops and still-subdued industrial activity.

Current expenditure was as per the Fund program 18.9 percent of GDP while current projection is the same (even though the growth has been downgraded from the program projection) though for next year the projection is 17.8 percent however the realization of this would depend on achieving the projected growth rate of 3.6 percent.

IMF lowers Pakistan’s FY25 GDP growth forecast to 2.6%

Public Sector Development Program was under the Fund program this year projected at 2.3 percent of GDP while the projection is now 2.5 percent however disbursements by the Planning Ministry do not lend credence to this upgrade.

Defence was budgeted and disbursed 1.7 percent of GDP while for next fiscal year it is projected at 1.9 percent of GDP.

Privatisation proceeds are budgeted at zero percent of GDP for the current year and for the next four years by the Fund.

Output of major crops was disappointing in H1 and industrial activity has remained subdued, but based on recent high frequency indicators projected an acceleration in fiscal year 2025 H2 and thereafter.

The Fund stated that inflation fell to 0.7 percent (yoy) in March driven by tight macro policies and, principally, lower food and energy prices. However, core inflation is still elevated at around 9 percent.

For the outgoing fiscal year 2025 inflation is revised down, although it is projected to increase notably in the coming months due to adverse base effects, with a durable return to the target range (5–7 percent) expected during fiscal year 2026, provided policy remains appropriately tight.

The current account deficit (CAD) for fiscal year 2025 is projected at about $0.2 billion (0.1 percent of GDP), helped by resilient exports and a stronger remittance outlook, as improved macro and FX stability has supported a rebound in remittance inflows through formal channels.

Over the medium term, the CAD is expected to widen modestly to around 1 percent of GDP as imports rebound. Gross (net reserves were not specified) international reserves are expected to continue to strengthen, supported by financing committed by multilateral and bilateral creditors, as well as prospective RSF disbursements ($1.3 billion).

Access to external commercial financing is expected to remain limited during the program, with a small “Panda” bond issuance anticipated in fiscal year 2026, ahead of a gradual return to the Eurobond/Global Sukuk market assumed in fiscal year 2027, reflecting a restoration of policy credibility.

The Fund has also lowered the exports projection to $31.305 billion for the outgoing fiscal year 2024-25 against the programmed $31.751 billion. Imports are projected to increase to $57.634 billion in the current fiscal year 2024-25 compared to the programmed $57.180 billion.

Copyright Business Recorder, 2025