IMF Raises Pakistan's Inflation Forecast to 9.9 Percent for This Fiscal Year

The International Monetary Fund raised its inflation forecast for Pakistan's current fiscal year to 9.9 percent, overtaking the government's own 8.2 percent target, in the October edition of its World Economic Outlook released October 13 at the Fund's annual meetings in Bangkok. The Fund left its growth projection for FY2026-27 unchanged at 3.5 percent, half a point below the 4 percent the government has set as its own target.

The inflation figure is a sharp upward revision from the IMF's own April and July outlooks, which had put FY27 inflation at 8.4 percent. The Fund gave no Pakistan-specific reason for the increase. Instead, it raised its regional inflation projections for the Middle East and Central Asia as a group, citing the ongoing conflict in the region and its effect on energy supply and prices. Pakistan imports the large majority of its fuel from Gulf Cooperation Council states, which puts the country's import bill directly in the path of that disruption.

A current account that moves the other way

Beyond growth and prices, the WEO also projects Pakistan's current account balance sliding into a deficit of 1 percent of GDP, roughly $4.4 billion, for FY2027. That marks a reversal from the surplus of 0.5 percent of GDP the Fund recorded for FY2025, and the new deficit figure is itself about $450 million wider than the IMF's previous projection. A current account that swings from surplus to deficit matters beyond the headline number: it is the balance the central bank draws on to defend the rupee and build reserves, which we track separately.

Where the government's own numbers diverge

Pakistan's Finance Division has maintained an 8.2 percent inflation target for the fiscal year, a figure the IMF's new forecast now sits nearly two full points above. The government has not disputed the IMF's growth number outright, but Islamabad has continued to argue externally that the economy can reach 4 percent growth, a full point above what the Fund is willing to project. The gap between the two sets of numbers is not new — the Asian Development Bank put FY27 growth at 3.7 percent in its own September forecast, closer to the IMF's figure than to the government's — but the widening inflation gap is the more consequential divergence this time, given how directly it bears on household budgets and on the State Bank's next policy-rate decision.

What determined the timing

The WEO is published twice a year in full, in April and October, with brief updates in between; this was the full October edition, launched alongside the IMF-World Bank annual meetings. "The global economy has been resilient, but that resilience is under strain with risks tilted to the downside," the IMF's chief economist, Silvana Tenreyro, said at the report's launch, a caution the Fund applied globally rather than to Pakistan specifically. Pakistan's own figures arrived embedded in a WEO that projects world growth of 3.1 percent in 2026, rising to 3.4 percent in 2027.

What to watch next

The State Bank of Pakistan's monetary policy committee is scheduled to meet on October 26, its first rate decision since the IMF's revised inflation forecast became public. The central bank has held its policy rate steady through its last several meetings; a forecast showing inflation running further above target than previously expected is the kind of signal that monetary policy committees are built to respond to, though the SBP has given no indication yet of how it will read the IMF's number against its own. The Fund's own in-depth assessment of Pakistan's program compliance, meanwhile, will not surface until its executive board takes up the fourth EFF and third RSF review, tentatively expected in late November.

Build Better Pakistan's Economy Desk is tracking the IMF's growth and inflation forecasts and will follow up after the State Bank's October 26 policy meeting.