IMF Forecasts 3.2% Growth for Pakistan’s Economy in FY25
The International Monetary Fund (IMF) has projected Pakistan’s GDP growth rate at 3.2% for the fiscal year 2024-25, a notable increase from the 2.4% recorded in FY24.
In its latest statement, the IMF’s Executive Board acknowledged the key measures Pakistan has taken to restore economic stability, highlighting the effective implementation of policies under the 2023-24 Stand-by Arrangement (SBA). The growth rebound in FY24 was supported by agricultural activity, while inflation has significantly decreased, now falling to single digits due to tight fiscal and monetary policies. Additionally, a stabilized current account and a calm foreign exchange market have facilitated the rebuilding of reserve buffers.
The State Bank of Pakistan has responded to these conditions by cutting the policy rate by a total of 450 basis points since June, aided by a well-managed FY25 budget.
Despite these improvements, Pakistan continues to face serious vulnerabilities and structural challenges. A challenging business environment, weak governance, and an overly dominant state sector hinder investment, which remains low compared to regional peers. Furthermore, the narrow tax base hampers fiscal sustainability and limits the government’s ability to address pressing social and developmental needs, particularly in health and education.
Without significant reform and adjustment, Pakistan risks lagging further behind its counterparts. The IMF emphasized the need for renewed efforts to tackle these challenges and foster resilience for sustainable growth. Key priorities under the new EFF-supported program include rebuilding policy credibility, enhancing macroeconomic stability through sound policies, broadening the tax base, advancing competition, reforming state-owned enterprises, and improving public services and energy sector viability, as well as building climate resilience.
Following the Executive Board discussions, Kenji Okamura, Deputy Managing Director and Acting Chair, underscored the importance of these efforts for Pakistan’s future economic trajectory.
