Islamabad, December 9, 2025: The International Monetary Fund’s (IMF) latest projections suggest that while Pakistan has stepped back from the brink of an economic free fall, it remains trapped in a narrow stabilisation path characterised by weak growth, a heavy debt burden and limited relief for households.
The projections, released early Tuesday alongside the IMF’s announcement of a fresh disbursement of about $1.2 billion to Pakistan, indicate that economic growth is expected to rise modestly from 2.6 per cent in FY2024 to 3.2pc by FY2026. This pace barely keeps up with population growth in a country of over 240 million people and points more towards economic containment than a sustained recovery.
With per capita income projected at just $1,677, the growth outlook offers little improvement in living standards. Pakistan’s population continues to expand at a relatively high rate, with mid-2025 official estimates at 2.55pc, while World Bank data places it between 1.8 and 1.9pc — still a major development challenge.
One of the most notable turnarounds has been in inflation. After averaging 23.4pc in FY2024, consumer price inflation is estimated to have dropped sharply to 4.5pc in FY2025, before rising again to 6.3pc in FY2026. End-period inflation is projected to fall from 12.6pc in FY2024 to 3.2pc in FY2025, but then climb to 8.9pc in FY2026, suggesting that price stability remains fragile despite aggressive disinflation driven by tight monetary policy, subsidy cuts and compressed demand under the IMF programme.
Labour market indicators provide limited reassurance. Unemployment is projected to decline only marginally from 8.3pc in FY2024 to 7.5pc by FY2026, highlighting the economy’s weak capacity to generate jobs under the current growth model.
On the fiscal side, the IMF projects a significant adjustment. Government revenues and grants are expected to rise from 12.7pc of gross domestic product (GDP) in FY2024 to 16.3pc by FY2026, while expenditures are forecast to remain close to 20pc of GDP. This would narrow the budget deficit from 6.8pc to 4.0pc of GDP, while Pakistan is expected to maintain a primary surplus rising to 2.5pc of GDP — a key IMF benchmark.
Despite these gains, public debt remains elevated. Total general government debt, including IMF obligations, is projected to hover between 72 and 73pc of GDP, while government and guaranteed debt is expected to remain near 76pc. Domestic debt alone accounts for nearly half of GDP, keeping interest costs high amid elevated borrowing rates.
External pressures have eased somewhat, but vulnerabilities persist. The current account balance is projected to remain close to zero, shifting from a 0.6pc GDP deficit in FY2024 to a 0.5pc surplus in FY2025, before slipping back into a small deficit in FY2026. Foreign exchange reserves are forecast to rise from $9.4 billion in FY2024 to $17.8bn by FY2026, increasing import cover from 1.6 months to 2.7 months — an improvement, though still below comfortable levels.
Foreign direct investment remains subdued, projected at just 0.5–0.6pc of GDP over the period, reflecting continued investor caution despite improved macroeconomic stability.
Monetary conditions are also expected to remain tight. Broad money growth is projected in the 14–16pc range, while private sector credit growth, though improving from 6pc to 15pc, remains constrained by high interest rates. The six-month treasury bill rate stood at 21.5pc in FY2024, underscoring the high cost of domestic borrowing.
Meanwhile, the 15.4pc real effective appreciation of the rupee in FY2024 signals a shift towards currency stability after a period of sharp depreciation, but also raises concerns about export competitiveness, particularly in an economy where textiles — valued at $17.3bn — remain the dominant export.
Overall, the IMF projections portray an economy that has regained short-term stability through strict fiscal and monetary adjustment, but remains weighed down by high debt, weak investment and slow employment growth. While the immediate crisis appears to have passed, the challenge of converting stabilisation into durable and inclusive growth remains unresolved.
Meanwhile, Prime Minister Shehbaz Sharif welcomed the latest IMF disbursement, terming it “proof that Pakistan is making progress in implementing the necessary steps for economic stability and growth,” according to a statement aired by Radio Pakistan.
The premier was quoted as saying that the IMF’s satisfaction with the implementation of reforms was a “clear testament to the hard work of Finance Minister Muhammad Aurangzeb and his team.” He also acknowledged the role of Chief of Defence Forces and Chief of Army Staff Field Marshal Syed Asim Munir in supporting the reform agenda and facilitating economic stability.
Prime Minister Sharif said steering the country away from the brink of default had been a challenging phase that required collective sacrifice. “Political parties sacrificed politics, and the nation endured economic hardships to make the impossible possible,” he said.
He expressed confidence that Pakistan’s economic reforms and digitisation efforts had become a “successful case study and an example for the world,” while stressing that although stability had been achieved, further efforts were needed to move the economy towards sustained growth.
Reaffirming his commitment to economic self-sufficiency, the prime minister said he was determined to work for the prosperity of the people and ultimately free the country from foreign debt, expressing optimism that Pakistan would achieve long-term economic independence.
