• Projects Pakistan’s GDP expanding at 3.6pc and inflation at 7.2pc
• Global growth slowing to 3.1pc this year

ISLAMABAD: The International Monetary Fund (IMF) on Tuesday forecast Pakistan’s current account deficit to widen alongside a 3.6 per cent growth rate for the current year, as the US-Israel misadventure in the Middle East darkens global growth prospects and fuels higher inflation.

In its unusually uncertain global economic outlook released during the ongoing spring meetings of the World Bank and IMF, the World Economic Outlook (WEO) — the IMF’s flagship publication — estimated the current account deficit to rise to 0.4pc of GDP during the current fiscal year and further expand to 0.9pc, compared to a current account surplus of 0.5pc of GDP.

The IMF projected Pakistan’s inflation rate, measured by the Consumer Price Index, at 7.2pc for the current year, rising to 8.4pc in 2027, against 4.5pc in FY25. It estimated economic growth at 3.6pc for the current year and slightly lower at 3.5pc for FY27.

On the other hand, the Fund projected the unemployment rate in Pakistan to decline from 7.1pc in 2025 to 6.9pc in FY26 and 6.5pc in FY27.

The IMF said the Middle East conflict had halted the economic growth momentum that had revived after the US trade policy shock and had darkened the global economic outlook. “Once again, the global economy is threatened with being thrown off course — this time by the outbreak of war in the Middle East at the end of February 2026. Over the past year, headwinds from higher trade barriers and elevated uncertainty have been offset by tailwinds from technology-related investment, accommodative financial conditions, including a weaker US dollar, and fiscal and monetary policy support,” it said.

The IMF added that the Middle East conflict presented a significant counterforce to these tailwinds through its impact on commodity markets, inflation expectations, and financial conditions.

Given the difficulty of underpinning a consistent set of assumptions for projections in real time, the WEO presented a “reference forecast” — in lieu of the traditional baseline — based on the assumption that the war will have limited duration, intensity, and scope, with disruptions fading by mid-2026, consistent with commodity futures prices as of March 10. It also included alternative scenarios in which the conflict lasts longer or expands, with the likelihood of such scenarios increasing as hostilities and disruptions continue.

Global growth

Under the reference forecast, the IMF projected global growth at 3.1pc in 2026 and 3.2pc in 2027, slower than its recent pace of about 3.4pc in 2024-25, and expected it to settle around that level in the medium term, below the historical (2000-19) average of 3.7pc. The forecast for 2026 has been revised downward by 0.2 percentage points, while that for 2027 remains unchanged compared to the January 2026 WEO update.

Global headline inflation is expected to rise to 4.4pc in 2026 before declining to 3.7pc in 2027, marking upward revisions for both years, the IMF said. Absent the war, global growth would have been revised upward by 0.1 percentage point to 3.4pc for 2026.

Therefore, the downward revision largely reflects disruptions from the Middle East conflict, partly offset by strong recent data and reduced tariff rates.

Published in Dawn, April 15th, 2026