IMF Warns of Rising Inflation in Pakistan, Releases Economic Projections for FY26

Islamabad: The International Monetary Fund (IMF) has warned of rising inflation in Pakistan, projecting that the inflation rate could increase from 4.5% to 6.3% in the current fiscal year and may reach 8.9% by June 2026. For comparison, the inflation rate was 3.2% in June 2025.

The IMF also released economic performance data for the last two years and projections for the current fiscal year. The country’s economic growth rate is expected to reach 3.2% in FY26, while the unemployment rate is likely to decline slightly from 8% to 7.5%.

The tax-to-GDP ratio is projected to rise to 16.3% in FY26, up from 15.9% in FY25. Meanwhile, the fiscal deficit is expected to improve, falling to 4% in FY26 from 5.4% in FY25. The overall debt burden is projected to slightly decrease to 69.6% of GDP, compared to 70.6% in FY25. Foreign debt is expected to remain stable at 22.5% of GDP.

Investment levels are projected to slightly decline, reaching 0.5% of the economy in FY26, down from 0.6% in FY25. On a positive note, foreign exchange reserves are expected to improve, rising to $17.8 billion in FY26 from $14.5 billion in FY25.

The IMF’s projections highlight concerns over inflation and the need for continued fiscal and economic reforms to maintain stability and support growth in Pakistan.