The International Monetary Fund (IMF), in its latest “Middle East and Central Asia Regional Economic Outlook” report, has issued a significant warning for Pakistan, suggesting a new storm of inflation could be approaching despite the country’s recognized progress on economic reforms.
According to the report, while Pakistan’s economy is expected to grow by 3.6% in the current fiscal year—and despite noted improvements in remittances and the current account during the 2024-25 fiscal year—these hard-won gains are facing new threats.
The IMF specifically projects that inflation is likely to rise again in the 2025-26 fiscal year. A primary driver for this expected pressure is the difficult but necessary step of ending electricity subsidies and normalizing tariffs, a move that will likely increase the burden on the public.
Furthermore, the report highlights two other major risks: ongoing regional tensions that could impact economic growth across the area, and the negative economic fallout from the floods that occurred in the third quarter of 2025.
While the IMF has acknowledged Pakistan’s efforts toward fiscal improvement, this latest outlook makes it clear that the path to sustainable economic stability remains challenging.
