The International Monetary Fund (IMF) has lowered its GDP growth projection for Pakistan to 2.6% for the current fiscal year, citing the impact of new US tariffs imposed by President Donald Trump.  This represents a significant downgrade from the previous 3% forecast. The revised forecast is part of the IMF’s World Economic Outlook report, released this week.

The report attributes the reduced growth outlook to the US tariff hikes, which reached as high as 29%, impacting several developing economies. While the IMF projects a rebound to 3.6% growth for the next fiscal year (2025-26), the immediate impact is concerning.

The IMF projects inflation at 5.1% for the current fiscal year, a significant decrease from the 23.4% recorded in 2024. However, the IMF anticipates a rise to 7.7% in the next fiscal year (2025-26).

Regarding Pakistan’s current account deficit, the IMF expects it to be 0.1% of GDP in the current fiscal year, amounting to $400 million. This is a considerable improvement from earlier projections.  However, the IMF forecasts an increase to 0.4% of GDP in 2026.

The unemployment rate is projected to remain steady at 8% in 2025, a slight decrease from 8.3% in 2024. The IMF further anticipates a reduction to 7.5% in 2026.

The IMF’s report highlights a broader trend of weakened growth forecasts across emerging markets and developing economies due to the US tariff escalation. Pakistan, along with other countries in the Middle East and Central Asia, is expected to face economic pressures from disrupted trade and increased global financing costs.

Pakistan’s Finance Minister, Muhammad Aurangzeb, recently participated in the World Bank Group and IMF Spring 2025 meetings in Washington D.C. During these meetings, he reiterated the government’s commitment to economic reforms and highlighted efforts to broaden the tax base. He also emphasized the country’s recent credit rating upgrade by Fitch, aiming to attract further investment.