THE IMF’s latest World Economic Outlook projects Pakistan’s economy to grow by 3.5pc in the current fiscal year, while average inflation climbs to 9.9pc. The current account is expected to slip into a deficit of 1pc of GDP. This forecast points to an economy that remains vulnerable despite recent gains in macroeconomic stability.

The economy expanded by 3.6pc last year. Further slowdown matters for a country with a rapidly increasing population, entrenched poverty, and high unemployment. Growth at this pace will hardly raise incomes meaningfully or absorb new entrants into the labour market.

Inflation poses another challenge. After easing to 7.1pc last year, it is forecast to rise sharply, leading to fears of further erosion of purchasing power. For families already squeezed by high energy costs, taxes, and essential expenses, renewed price pressures will undermine any benefits from economic stabilisation. The projected current account deficit signals renewed pressure on foreign exchange earnings.

Higher oil prices and shipping disruptions make imports more expensive. Unless exports grow faster and are more diversified, stronger domestic demand could again widen the external gap. The IMF expects unemployment to decline to 6.5pc in FY27 from 6.9pc the previous year. But, in the absence of stronger growth, which can create a sufficient number of jobs, that is hardly of any comfort. It does not establish whether new jobs will be productive, secure or adequately paid. Nor does it show whether employment is expanding fast enough to keep pace with the working-age population.

The South Asia region is forecast to grow by 6.4pc in 2026. Pakistan’s 3.5pc projection places it far below the regional average, highlighting our failure to build a sustained growth engine. The global picture is also distressing. The IMF forecasts global growth of 3.1pc in 2026, rising to 3.4pc in 2027. Investment in AI is supporting activity in some economies. Others face higher energy costs, trade disruptions, and tighter financial conditions. Growth is also becoming increasingly uneven. We must prepare for these pressures rather than assume that stabilisation will deliver prosperity.

The immediate task is to contain inflation and protect vulnerable households without reviving unsustainable subsidies or excessive demand. For that, the government must shift resources towards productive investment, improve the competitiveness of industry, broaden the tax base and expand export capacity. Better education, skills, and employment opportunities are equally important. These changes require consistent policies, not another short-lived cycle of incentives and concessions. The IMF projections expose the cost of postponing structural reform. An economy growing at 3.5pc, with inflation approaching double digits and a weakening external balance, remains vulnerable to the next shock.

Published in Dawn, October 15th, 2026