IMF Slashes Pakistan’s GDP Growth Forecast for FY2024–25 Amid Weak Crop and Industrial Output

IMF Slashes Pakistan’s GDP Growth Forecast for FY2024–25 Amid Weak Crop and Industrial Output

The International Monetary Fund (IMF) has revised down Pakistan’s GDP growth forecast for the fiscal year 2024–25 to 2.6 percent, a notable drop from its earlier projection of 3.2 percent made in October 2023. The downgrade comes on the back of disappointing crop yields, sluggish industrial activity in the first half of the fiscal year, and persistent global economic uncertainty.

According to the IMF’s latest review under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF), Pakistan’s economy grew by just 1.3 percent in the first quarter and 1.7 percent in the second quarter of FY2024. The weak performance was largely attributed to poor Kharif crop output and subdued industrial production.

On the fiscal front, current expenditure remains high at 18.9 percent of GDP, though it is expected to decline to 17.8 percent in FY2025–26. The Public Sector Development Program (PSDP) has been revised upward from 2.3 percent to 2.5 percent of GDP, but the IMF flagged concerns over slow disbursements by the Planning Ministry.

Privatisation efforts remain stalled, with proceeds projected at zero percent of GDP for FY2024 and the next four years.

Inflation has shown signs of easing, falling to 0.7 percent year-on-year in March 2025, thanks to tight monetary policies and lower food and energy prices. However, core inflation remains stubbornly high at around 9 percent. The IMF expects inflation to rise temporarily in FY25 before stabilising at 5–7 percent in FY26.

The current account deficit for FY25 is projected at just $0.2 billion, or 0.1 percent of GDP, supported by stable exports and rising remittances amid a stable foreign exchange environment. However, the medium-term current account deficit is expected to widen to 1 percent of GDP as imports recover.

Gross international reserves are forecast to increase, buoyed by multilateral and bilateral inflows and $1.3 billion in expected RSF disbursements. Access to commercial external financing remains limited, with a small Panda bond planned for FY26 and a gradual return to global markets anticipated in FY27.

On the trade front, the IMF has revised down its export projection for FY25 to $31.305 billion, compared to the previous estimate of $31.751 billion. Imports are now expected to reach $57.634 billion, slightly higher than the earlier forecast of $57.180 billion.