IMF raises Pakistan’s inflation forecast to 9.9%

Summary

• The International Monetary Fund (IMF) has raised Pakistan’s inflation forecast to 9.9% for the current fiscal year while maintaining its economic growth projection at 3.5%.
• The revised estimates indicate that the lender remains cautious about the country’s economic outlook despite the government’s expectations of stronger growth and lower inflation.
• The IMF has kept Pakistan’s economic growth forecast at 3.5% for the current fiscal year, unchanged from its previous estimate.

AI Generated Summary

The International Monetary Fund (IMF) has raised Pakistan’s inflation forecast to 9.9% for the current fiscal year while maintaining its economic growth projection at 3.5%. The revised estimates indicate that the lender remains cautious about the country’s economic outlook despite the government’s expectations of stronger growth and lower inflation.

According to the IMF’s latest World Economic Outlook (WEO) report, released on Tuesday, inflation in Pakistan is expected to rise significantly from the 8.4% forecast issued in April and retained in July. The new projection is also above the government’s official inflation target of 8.2% for the fiscal year 2026-27.

The IMF has not provided a specific explanation for the upward revision in Pakistan’s inflation outlook. However, it has highlighted rising energy prices and disruptions to global supplies amid the ongoing conflict in the Middle East as major factors contributing to renewed inflationary pressures across several regions.

The higher inflation forecast could complicate monetary policy decisions and increase pressure on the State Bank of Pakistan to maintain tight financial conditions. Higher interest rates may be considered necessary to contain price increases, although the IMF report does not explicitly recommend a specific rate adjustment for Pakistan.

Pakistan’s government has been passing higher fuel costs on to domestic consumers while continuing to collect substantial taxes on petroleum products. It has also introduced monthly financial assistance of Rs2,000 for motorcyclists and Rs3,000 for small car owners to provide relief from rising fuel expenses. However, the IMF has criticised the scheme, describing it as broad-based and costly.