����ֱ��

KARACHI: The International Monetary Fund (IMF) is likely to lower its growth estimates for Pakistan’s economy after concluding its ongoing performance review under the $7 billion Extended Fund Facility (EFF) and $1.4 billion Resilience and Sustainability Facility (RSF), economic experts said Tuesday.

The IMF in April’s World Economic Outlook projected Pakistan’s gross domestic product (GDP) to increase by 3.6 percent. It also forecast consumer prices to rise 7.7 percent, the current account deficit to remain at 0.4 percent and unemployment to stand at 7.5 percent in the ongoing financial year.

“The revision [by the IMF] can be expected given the initial assessments on Pakistan’s flood damages,” Sana Tawfik, head of research at Arif Habib Ltd, told Arab News. “There are losses to crops and the livestock.”

However, she refused to share how much the IMF might revise its assessment.

Mahir Binici, IMF’s resident representative to Pakistan, did not respond to questions seeking his comments.

An IMF mission led by its chief Iva Petrova is currently in Pakistan for its review under the EFF and RSF as the South Asian nation assesses the damage from recent floods that killed more than 1,000 people during this year’s monsoon.

The deluge also destroyed homes and farmland across thousands of acres.

If Pakistan clears the end-June 2025 review and meets the agreed policy benchmarks, it will qualify for about $1 billion under the EFF and more than $100 million from the RSF.

“Pakistan’s GDP growth for FY26 is now projected at around 3.2 percent, revised down from our earlier estimate of 3.46 percent, reflecting the impact of recent floods,” said Tawfik, sharing the economic projections of her organization.

“While official damage assessments suggest limited overall losses, the State Bank of Pakistan (SBP) in its latest monetary policy statement noted that floods have dampened the growth outlook,” she added.

Pakistan’s government has also cut its FY26 GDP growth target to 3.9 percent from an earlier 4.2 percent, citing monsoon floods that caused an estimated $1.3 billion in damage, according to a preliminary assessment seen by Arab News.

However, the current figures reflect losses only from Punjab province, with evaluations in Sindh and other regions still underway.

“Given that the review discussions and assessment of the recent floods are still going on, we may see this projection slightly revising downwards in the near future,” Amreen Soorani, head of research at Al Meezan Investment Management Ltd., told Arab News.

Asked how much of a cut she expects from the IMF after the reviews, she said it “will depend on the conclusion of the flood impact assessment.”

Muhammad Waqas Ghani, head of research at JS Global Capital Ltd., said he expected 3.2 percent growth this year.

He agreed the IMF was likely to make “a slight downward revision” in its projections for Pakistan.

“While it is early to assess the impact, Pakistan, being an agrarian country, with direct agriculture contribution to GDP of around 22 percent, could reach a vulnerable position in the aftermath of these floods,” he continued.

The repercussions, Ghani added, may include increased imports, weaker exports and higher inflation.

Pakistan’s finance ministry backed Ghani’s assessment on Tuesday, saying flood-related disruptions may put pressure on food supply chains and push up consumer prices.

“Inflation is expected to rise temporarily but remain contained within the 3.5-4.5 percent range in September 2025,” the ministry said in its monthly economic report.

However, it asserted that economic activity had been “broadly stable” despite the floods.

“The rebound in large-scale manufacturing, supported by encouraging trends in cement dispatches, automobile production and allied industries, indicates strengthening industrial momentum in the months ahead,” the report said, forecasting a “stable” external sector and a “manageable” current account deficit despite stronger import demand.

“Remittances continue to provide strong support, exports are showing early signs of recovery and declining global commodity prices may help ease the import bill,” it added.

Tawfik remained optimistic about Pakistan’s next Rabi crop, which she said looked “stronger” due to expectations of improved post-flood yields.

Meanwhile, Ghani warned of fiscal strain ahead.

“The situation may also put pressure on the fiscal side if the government opts to impose a surcharge or additional tax to cover relief efforts, rehabilitation expenses or potential subsidies for the affected segments,” he added.

ISLAMABAD: Pakistan said in its economic outlook on Monday recent floods could push food prices higher in the weeks ahead but inflation was expected to stay below 4.5 percent this month, underscoring a broadly stable economic outlook despite severe weather shocks.

The finance ministry’s September economic outlook said flood-related supply chain disruptions may cause a temporary rise in prices, which eased to 3 percent in August, the lowest in more than three years, but forecast that inflation will remain contained between 3.5 and 4.5 percent in September 2025.

The report said the broader economy had continued to stabilize in the first two months of the fiscal year, with large-scale manufacturing rebounding, fiscal balances improving and investor confidence staying firm despite widespread flood damage.

Pakistan is currently in the first year of a $7 billion Extended Fund Facility (EFF) approved by the International Monetary Fund in September 2024, a program that has helped restore investor confidence, stabilize foreign exchange reserves and support a recovery in growth after years of balance-of-payments pressures.

Fiscal discipline has also improved, with the primary surplus rising to a 24-year high and the fiscal deficit narrowing to its lowest in eight years, while inflation has slowed and the rupee has stabilized. The government is seeking to build on these gains even as it grapples with the economic fallout of this year’s floods.

“Flood-related disruptions may exert pressure on food supply chains, leading to an uptick in prices. As a result, inflation is expected to rise temporarily but remain contained within the 3.5–4.5 percent range in September 2025,” the Ministry of Finance said in its Monthly Economic Update & Outlook.

“Although flood-induced disruptions pose temporary risks to inflation, the overall outlook signals a stable macroeconomic environment, with supportive trends in industry, external inflows, and fiscal management expected to underpin sustainable growth going forward,” the document added.

The ministry said Pakistan’s economy “maintained its trajectory of stabilization and growth” in the first two months of FY2026, supported by moderating inflation, a rebound in large-scale manufacturing (LSM) and continued fiscal consolidation.

The LSM sector grew 9.0 percent year-on-year in July 2025, with 16 of 22 sub-sectors recording positive growth. Automobile output surged — car production jumped 100.9 percent, trucks and buses 69.5 percent, and jeeps and pickups 50.1 percent — while cement dispatches climbed 20.9 percent to 7.847 million tons, including a 51.3 percent surge in exports.

Despite severe losses to crops and livestock, agricultural credit disbursement rose 19.5 percent to Rs404.2 billion ($1.45 billion) in July-August. Imports of agricultural machinery increased 66.7 percent to $29.4 million, while fertilizer offtake also rose compared to last year.

MACROCONOMIC POSITION

Pakistan’s fiscal accounts showed further improvement, with the primary surplus rising to Rs228.9 billion ($814 million), or 0.2 percent of GDP, in July, up from Rs107.1 billion ($381 million), or 0.1 percent of GDP, a year earlier — the highest in 24 years. Net federal revenues grew 7.7 percent to Rs440 billion ($1.56 billion), supported by a 14.8 percent increase in tax revenues and a 23.9 percent rise in non-tax receipts, including petroleum levies, dividends, and defense income.

Overall, the fiscal deficit was contained at 0.2 percent of GDP, and the government reiterated its commitment to “further improve the fiscal performance in FY2026 through effective resource mobilization and a prudent expenditure management strategy.”

The current account deficit widened to $624 million in July-August from $430 million a year earlier as imports rose 8.8 percent to $10.4 billion. However, exports increased 10.2 percent to $5.3 billion, led by knitwear (16.9 percent), garments (10.6 percent), and bedwear (12.0 percent).

Remittances rose 7.0 percent year-on-year to $6.4 billion, with inflows from ����ֱ�� and the United Arab Emirates accounting for nearly half.

Net FDI inflows stood at $364.3 million, driven by investment in power ($156.9 million) and financial services ($110.2 million), while foreign exchange reserves reached $19.8 billion as of September 19, including $14.4 billion held by the State Bank of Pakistan.

The central bank kept the policy rate unchanged at 11 percent on September 15, citing moderate inflation and improving indicators but warning of uncertainty from flood impacts. Broad money supply contracted by 2.3 percent during the first two months of FY2026, while budgetary borrowing was sharply reduced.

Investor confidence remained strong, with the benchmark KSE-100 Index climbing 9,227 points in August to close at 148,617. Market capitalization surged by Rs952 billion ($3.38 billion) to Rs17.65 trillion ($62.7 billion).

Looking ahead, the ministry said remittances and exports “continue to provide strong support” to the external account, while easing global commodity prices could help reduce the import bill.

It added that economic activity “has remained broadly stable” despite the floods, with strengthening industrial momentum and a manageable current account deficit expected in the months ahead.