IMF raises Pakistan's inflation forecast to 9.9% while keeping growth at 3.5%, challenging official targets

The International Monetary Fund (IMF) raised its inflation projection for Pakistan to 9.9% for the fiscal year in its latest World Economic Outlook (WEO) report released on Tuesday, October 13, 2026, signaling a more constrained macroeconomic environment than the government’s official targets of faster recovery and price stabilization.

Why did the IMF revise Pakistan's inflation and current account projections upward?

The revised 9.9% consumer price forecast represents a 1.5 percentage point increase from the lender's 8.4% projection maintained in July, significantly overshooting the federal government’s annual inflation benchmark of 8.2%. While the fund did not cite Pakistan-specific factors exclusively, the upward revision mirrors broader adjustments across the Middle East and Central Asia, where prolonged geopolitical conflicts and Persian Gulf transit disruptions have sharply increased international energy import costs.

Compounding domestic price pressures, the IMF widened its forecast for Pakistan’s current account deficit to 1.0% of gross domestic product (GDP)—amounting to approximately $4.4 billion.

The revised deficit represents a $450 million expansion compared to earlier estimates, reflecting higher energy import bills and intensified balance-of-payments pressures. The elevated inflation profile is expected to complicate upcoming monetary policy decisions for the State Bank of Pakistan, which faces pressure to keep benchmark interest rates tight to prevent second-round inflationary spirals.

How does the lender's forecast clash with the government's growth targets and fuel subsidies?

The IMF maintained Pakistan’s real GDP growth forecast at 3.5%, holding firm despite Pakistani economic managers’ efforts during recent review talks to demonstrate that the economy is on track to achieve the official 4.0% annual growth target. Federal Minister for Finance Muhammad Aurangzeb pushed back against the fund's conservative outlook, reiterating confidence that full-year output will expand beyond 4% as industrial activity and privatization efforts gain traction.

Frictions have also emerged over Islamabad’s domestic consumer relief measures. While the federal government has passed elevated global oil import costs onto retail petroleum rates, it instituted monthly cash compensation payouts of PKR 2,000 for motorcyclists and PKR 3,000 for small-car owners to cushion lower-income households. The IMF raised formal objections to the relief scheme during review discussions, categorizing it as costly, broad-based, and misaligned with strict fiscal consolidation requirements under the loan program.

The IMF's comprehensive staff report will be finalized ahead of its Executive Board meeting tentatively scheduled for late November to approve the next loan tranche.