Islamabad – Amid a regional war that has shattered global markets and choked energy supplies, Pakistan has presented a surprisingly resilient economic outlook to the International Monetary Fund (IMF) , projecting 4% GDP growth and a manageable $2 billion current account deficit for the current fiscal year.
During two high-level sessions with the IMF, the Finance Ministry shared detailed macroeconomic projections, downplaying the potential fallout from the US-Israel war against Iran. The assessment comes despite the government’s recent decision to hike petrol prices by a record Rs55 per litre.
Growth and the Current Account
The government informed the IMF that while the war poses a risk, its impact on Pakistan’s economy would be contained.
- Growth: The GDP growth target has been revised to 4% , a marginal 0.2% reduction from the pre-war scenario. If the conflict ends earlier, the government believes growth could even reach 4.5% .
- Current Account Deficit: The deficit is projected to hover around $2 billion , up from a pre-war estimate of $1 billion. This projection is based on an average crude oil price of $100 per barrel.
- Counterbalancing Factors: The government argues that any increase in the oil import bill (estimated at an additional $300 million per month at $100/barrel) will be offset by savings of approximately $800 million from reduced agricultural imports, thanks to a better local harvest.
Inflation and Remittances
The Finance Ministry’s projections on inflation and remittances were equally optimistic.
- Inflation: Despite the massive fuel price hike, the government told the IMF that the impact on the Consumer Price Index (CPI) would be marginal—between 0.2% and 0.3% . This is based on the fact that petrol has a relatively small weight in the overall inflation basket. The government expects annual inflation to remain below 6.5% .
- Remittances: With 14 million Pakistanis working abroad, including an estimated 4.5 million in the Middle East, the government projects remittances to reach $43 billion this fiscal year, with additional support expected during the Eid period.
IMF’s Perspective and Central Bank View
The IMF acknowledged that oil price volatility remains the most significant external risk but noted that Pakistan is currently in a “relatively stable macroeconomic position.”
The State Bank of Pakistan (SBP) echoed this sentiment in its latest Monetary Policy Committee statement. “The MPC’s initial assessment of the evolving geopolitical situation indicates that the outlook for key macroeconomic variables for fiscal year 2026 is within the earlier projected ranges,” the statement read.
However, the central bank also cautioned that risks have “increased significantly.” It noted that while Pakistan’s FX and fiscal buffers are better now than during the Russia-Ukraine war in 2022, the intensity and duration of the current conflict will be critical determinants of the final economic impact.
The Reality Check
The government’s projections have raised eyebrows, given the severity of the global shock. At $100 per barrel, the monthly impact on the oil import bill is estimated at $300 million, rising to $500 million if prices hit $120. Pakistan has already recorded a $1.1 billion current account deficit in the first seven months of the fiscal year.
The government’s confidence rests on the hope that the conflict will be short-lived and that domestic factors—like a strong harvest—can offset external pressures.
