IMF Raises Pakistan’s Inflation Forecast to 9.9 Percent for FY27 While Keeping Growth at 3.5 Percent, Both Estimates at Odds With Government Targets

ISLAMABAD: The International Monetary Fund (IMF) has raised its inflation forecast for Pakistan. In its World Economic Outlook released on Tuesday, the fund lifted the inflation projection for fiscal year 2026-27 from 8.4 percent to 9.9 percent.

Forecast sits above the government target

The IMF’s new projection is clearly above the government’s annual inflation target of 8.2 percent. The fund had forecast 8.4 percent in April and held that estimate in July, but has now added one and a half percentage points. According to the report, inflation stood at 7.1 percent in the previous fiscal year. The fund gave no Pakistan-specific reason for the revision, although it also raised inflation forecasts for the Middle East and Central Asia, where the ongoing regional conflict has disrupted energy supplies and pushed prices higher.

Growth held below target, deficit seen wider

On economic growth, the IMF kept its projection at 3.5 percent, below the government’s 4 percent target, even though Finance Minister Muhammad Aurangzeb has expressed confidence that growth will come in above 4 percent. The fund expects the current account deficit to reach 1 percent of GDP, roughly 4.4 billion dollars and higher than its earlier estimate, while unemployment is forecast to ease from 6.9 percent to 6.5 percent.

Official position and the pressure ahead

In recent staff-level talks, Pakistani authorities maintained that the annual inflation target remains achievable despite mounting price pressures. The fund, however, has raised concerns about the government’s monthly fuel compensation scheme for motorcyclists and small-car owners, describing it as broad-based and costly. Analysts say the higher inflation outlook could keep pressure on interest-rate decisions in the coming months, although the report sets no new interest-rate condition for Pakistan.