The International Monetary Fund (IMF) has revised Pakistan’s GDP forecast for the fiscal year 2024-25 down to 2.6%, citing weak economic activity in the first half and global uncertainty. The earlier projection in October stood at 3.2%.
Sluggish Growth in First Half
The IMF’s review noted growth slowed in the first two quarters of the fiscal year, with year-on-year rates of 1.3% and 1.7%. The dip was largely due to poor Kharif crop yields and sluggish industrial activity. Overall GDP for FY24 was 2.5%, as earlier estimated by the Fund.
Public Spending and Budget Trends
Current expenditure remained at 18.9% of GDP, in line with IMF program targets. For FY26, the IMF projects it to fall to 17.8%, contingent on achieving a 3.6% GDP growth. Public Sector Development Program (PSDP) spending is expected to be 2.5% of GDP, up slightly from the earlier 2.3%. Defence expenditure is projected to rise from 1.7% to 1.9% of GDP in the next fiscal year. No privatisation proceeds are expected in the current or following four fiscal years.
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Inflation Pressures Persist
While headline inflation dropped to 0.7% year-on-year in March due to tighter policies and falling food and energy prices, core inflation remains high at around 9%. The IMF expects inflation to climb again in the coming months, but gradually fall back into the 5–7% target range during FY26, assuming tight monetary policies are maintained.
Trade and External Outlook
The current account deficit for FY25 is expected to remain minimal at $0.2 billion or 0.1% of GDP. This stability is supported by steady exports and rebounding remittances. Over the medium term, the deficit may grow slightly to 1% as imports pick up. Exports are now forecast at $31.3 billion, slightly down from the programmed $31.7 billion. Imports are expected to rise to $57.6 billion, exceeding the earlier projection of $57.2 billion.
The IMF anticipates limited access to external commercial financing during the program period, with a small Panda bond issuance in FY26 and a return to the Eurobond market by FY27.
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