Summary The IMF has raised Pakistan’s inflation forecast to 9.9% for FY2026-27, while maintaining its GDP growth projection at 3.5%. Unemployment is expected to ease to 6.5%
ISLAMABAD (Dunya News) - The International Monetary Fund (IMF) has projected Pakistan’s inflation rate to rise to 9.9% in the 2026-27 fiscal year, up from 7.1% in the previous fiscal year, while maintaining its economic growth forecast at 3.5%.
According to the IMF’s World Economic Outlook (WEO) report released on Tuesday, the higher inflation outlook signals continued price pressures on Pakistan’s economy despite expectations of moderate economic growth.
The lender has kept Pakistan’s gross domestic product (GDP) growth forecast for the current fiscal year unchanged at 3.5%. The economy recorded estimated growth of 3.6% in 2025, according to the report.
The IMF also projected Pakistan’s unemployment rate to decline to 6.5% in FY2026-27 from 6.9% in the preceding fiscal year.
Meanwhile, the country’s current account deficit is expected to reach 1% of GDP in the current fiscal year, while the projection for 2026 remained unchanged, the report said.
Inflation remains a key economic challenge
The projected increase in inflation could put further pressure on household budgets, particularly those of lower- and middle-income families, which spend a substantial share of their earnings on food, transport, housing and utilities.
Higher inflation can also affect businesses by increasing production, transportation and financing costs, potentially influencing investment decisions and consumer demand.
For Pakistan, the challenge will be to sustain economic growth while containing price increases and protecting the purchasing power of households.
The inflation forecast will also be important for monetary policy, as persistent price pressures could complicate decisions on interest rates and the cost of borrowing.
IMF projects global growth at 3.1%
The IMF expects the global economy to grow by 3.1% in 2026, slightly higher than its July forecast of 3%, despite mounting risks from the conflict in the Middle East and elevated energy prices.
Global growth is projected to accelerate to 3.4% in 2027, unchanged from the July forecast but 0.2 percentage points higher than the IMF’s April projection.
The report said investment in artificial intelligence (AI) infrastructure was helping offset some of the economic damage caused by the energy shock and geopolitical uncertainty.
However, the lender warned that the global economic outlook remained vulnerable to a prolonged Middle East conflict, higher inflation, worsening fiscal conditions and uncertainty surrounding returns on AI investment.
“The global economy has been resilient, but that resilience is under strain, with risks to growth tilted to the downside,” the IMF’s chief economist, Silvana Tenreyro, said, according to the report.
She warned that a prolonged conflict in the Middle East could intensify inflationary pressures and weaken economic growth.
Mixed outlook for major economies
The IMF projected the United States economy to grow by 2.3% in both 2026 and 2027. Private consumption, tax cuts and investment in AI are expected to support economic activity, although imports associated with AI investment could offset some of the benefits.
The eurozone’s growth forecast for 2026 was revised upward to 1.1% from 0.9% in July, supported by stronger AI-related investment and higher defence spending.
Britain’s growth projection was also raised by 0.3 percentage points to 1.3% for 2026, reflecting increased investment in AI.
China’s economy is expected to expand by 4.5% in 2026 and 4% in 2027. Both forecasts were reduced by 0.1 percentage points from the IMF’s July projections, with higher oil prices adding to concerns about weak domestic demand.
India is forecast to remain the fastest-growing major economy, with growth of 7% projected for both 2026 and 2027. Strong domestic demand, services activity and AI investment are expected to support its expansion.
AI investment and energy risks
The IMF said rising investment in AI infrastructure was providing a boost to economic activity, particularly in countries involved in developing AI platforms and supplying related hardware.
However, the technology boom also presents risks if expected returns fail to materialise or investment slows sharply.
Under a scenario involving faster AI adoption and increased investment, global GDP could rise by an additional 0.6% by 2029, with the largest benefits expected to accrue to the United States and China.
Global headline consumer price inflation is projected at 4.7% in 2026 before easing to 4.1% in 2027.
The IMF cautioned that energy price shocks, geopolitical tensions, fiscal pressures and extreme weather events could weaken the global outlook.
For Pakistan, the latest projections underline the need to balance inflation control with measures that support investment, employment and sustainable economic growth.
