The International Monetary Fund (IMF) has projected that Pakistan’s economy will grow by 2.6% in the current fiscal year, with the growth rate expected to rise gradually over the next few years.
These insights were shared in the IMF's recently released Pakistan Country Report, which outlines key economic indicators, reforms, and fiscal adjustments agreed upon by the government.
According to the report, the economic growth rate is expected to increase to 3.6% in the next fiscal year (2025-26), followed by a projected growth of 4.1% in 2026-27. Between 2027 and 2030, the economy is expected to maintain a steady upward trajectory, with an average growth rate of 4.5%.
Inflation outlook and fiscal discipline
The IMF noted that inflation during the current fiscal year is expected to remain limited to 5.1%. However, it is forecasted to rise to 7.7% in the next fiscal year. Between 2026 and 2030, the average inflation rate is predicted to hover around 6.5%.
To address fiscal imbalances, the government has assured the IMF that it will implement strict expenditure control measures. This includes a cut of Rs87 billion from the Public Sector Development Programme (PSDP) and further restrictions on unnecessary spending.
A total of Rs54 billion in energy subsidies will be eliminated, and Rs188 billion from emergency allocations will remain unused to ensure fiscal responsibility.
The government also aims to maintain core expenditures at Rs15,958 billion while preserving funding for essential social sector programs.
Debt-to-GDP ratio and fiscal targets
A key highlight of the IMF report is the projected improvement in Pakistan’s debt-to-GDP ratio, which is expected to decrease to 71.9% in the fiscal year 2025-26 and gradually decline to 61% by 2030.
Pakistan has reaffirmed its commitment to achieving a primary surplus of 1.0% of GDP, a critical benchmark for securing long-term financial stability. Non-tax revenue is expected to reach 3% of GDP, the report stated.
Tax reforms and revenue targets
On the revenue side, the IMF emphasized the need for increased tax collection, adding that if revenue fell, proportionate cuts would be made in expenditure. The Federal Board of Revenue (FBR) has set a revised target of Rs12,332 billion for the current fiscal year, aiming to bring total FBR revenue to 10.6% of GDP.
Efforts are also underway to enhance tax administration and compliance. These include:
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Improving compliance risk management
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Monitoring the digital value chain
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Strengthening faceless customs assessments
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Identifying irregularities in sales tax returns
Additionally, the IMF acknowledged that provincial tax authorities have demonstrated better performance, adding to the optimism around improved domestic resource mobilisation.
Legal reforms and court case resolutions
The government is actively working to resolve pending court cases worth Rs770 billion, which are expected in May and June to help bridge fiscal gaps. According to the IMF, key tax-related cases are currently pending in:
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Supreme Court (Rs43 billion)
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Islamabad, Sindh, and Lahore High Courts (Rs217 billion)
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Inland Revenue Appellate Tribunal (Rs104 billion)
Initial hearings in the Supreme Court have already been conducted, and a positive verdict could resolve around Rs120 billion worth of disputes.
