The IMF predicts inflation reduction but again lowers its growth prediction for Pakistan.

In addition to forecasting a sharp drop in inflation, the International Monetary Fund (IMF) has lowered its estimate of Pakistan’s economic growth for the current fiscal year from 3% to 2.6%.

The Fund stated in its most recent World Economic Outlook (WEO) report, which was made public on Tuesday, that although inflationary pressures are anticipated to significantly decrease, economic growth is probably going to stay below the government’s aim.

The IMF now projects that the economy would grow by 2.6 percent, down from its January 2025 projection of 3 percent and October 2024 estimate of 3.2 percent. The government had set a GDP growth target of 3.6 percent for the current fiscal year. But with GDP growth expected to reach 3.6 percent next year, the Fund expects a recovery.

The WEO also predicts that Pakistan’s inflation rate would fall to 5.1 percent for the current fiscal year, which is a significant decrease from the 10 percent figure that was first anticipated. However, it is anticipated that inflation will slightly increase to 7.7 percent in the upcoming fiscal year.

Positive information on the nation’s foreign account is also included in the report. From an initial estimate of 1 percent of GDP, the current account deficit is predicted to drastically shrink to just $400 million, or 0.1 percent. The current account deficit is expected to increase somewhat to 0.4 percent of GDP in the upcoming fiscal year.

Although Pakistan’s external indicators have improved, the IMF has noted enduring weaknesses in the growth forecast. The reduced growth prediction, according to analysts, is a reflection of the Fund’s program’s continued structural issues, poor private investment, and fiscal consolidation initiatives.

The global financial organization also projects that global growth will be between 2.4 and 2.8 percent this year, pointing to geopolitical concerns and ongoing monetary tightening in industrialized nations as major threats to the overall picture.

The updated prediction coincides with Islamabad’s ongoing attempts to obtain a new, more extensive IMF bailout package to stabilize its economy after the $3 billion Stand-By Arrangement (SBA) ended.

Economic analysts point out that although lowering inflation provides some respite for consumers, the slower growth trajectory may further strain household incomes and job creation in a nation already struggling with high rates of poverty and a precarious investment environment.