ISLAMABAD (Mudasar Ali Rana) – Pakistan is unlikely to meet its budgetary targets for the fiscal year 2025 due to the economic disruption caused by severe flooding, the International Monetary Fund (IMF) stated in its latest Regional Economic Outlook report. According to the IMF, Pakistan's GDP growth for FY2025 is now projected at 3.6%, down from earlier expectations.
The report highlights that the devastating floods have inflicted significant economic damage, impacting key sectors and threatening to increase inflationary pressures and the current account deficit.
The IMF emphasised the urgent need for Pakistan to implement structural reforms, particularly in the taxation system and energy sector. While acknowledging the government's ongoing efforts to improve financial discipline and implement reforms, the report warns that short-term subsidies across various sectors need to be phased out.
Despite the challenges, the IMF report forecasts a brighter long-term outlook, predicting that Pakistan’s GDP growth could reach 4.5% by the fiscal year 2030, provided reforms continue and macroeconomic stability is maintained.
Report also notes a modest decline in inflation compared to previous years. Furthermore, increased remittances have played a role in helping manage the current account deficit, offering some relief amid broader economic concerns.
In the regional context, Pakistan is expected to be the third-fastest growing economy among middle-income countries during the current fiscal year, trailing behind Egypt and Morocco. The report estimates an overall growth of 3.7% for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region. The projected fiscal deficit for the region stands at 2.8%, with inflation expected to average around 9%.