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Home » Shocking Blow to Pakistan’s Economy: IMF Slashes GDP Growth Forecast to 2.6% Amid Rising Challenges
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Shocking Blow to Pakistan’s Economy: IMF Slashes GDP Growth Forecast to 2.6% Amid Rising Challenges

By Yasher RizwanMay 19, 2025No Comments2 Mins Read3 Views
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IMF engages with Pakistan on agricultural income tax, sparking debate on economic effects and revenue generation.
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In a stark warning to Pakistan’s economic resilience, the International Monetary Fund (IMF) has drastically cut its GDP growth forecast for the fiscal year 2024-25 from an optimistic 3.2% to a sobering 2.6%. This downward revision reflects the harsh realities of sluggish crop yields, faltering industrial activity, and growing global uncertainties shaking the foundations of Pakistan’s economy.

The IMF report reveals that the first half of the year witnessed weak economic performance, with growth barely touching 1.3% in Q1 and 1.7% in Q2. Key agricultural outputs, particularly major Kharif crops, suffered disappointing yields, while the industrial sector remains restrained, dimming hopes for a strong recovery.

Despite these setbacks, the government’s current expenditure remains steady at 18.9% of GDP, though the forecast for next year assumes a hopeful 3.6% growth that must be vigorously pursued to avoid further economic strain.

The Fund also highlights worrying signs in Pakistan’s Public Sector Development Program, noting that official disbursements have yet to match ambitious targets, and flags defense spending expected to rise slightly to 1.9% of GDP next fiscal year.

While inflation showed signs of easing with a March figure of just 0.7% year-on-year—largely due to disciplined macroeconomic policies and falling food and energy prices—core inflation stubbornly remains elevated near 9%, threatening the purchasing power of everyday Pakistanis.

The current account deficit (CAD) stands narrowly at $0.2 billion (0.1% of GDP) thanks to resilient exports and strong remittances fueling economic stability. However, the IMF warns that the CAD may widen as imports rebound, placing additional pressure on foreign reserves despite ongoing support from international creditors and aid programs.

External financing options remain limited, with only a small Panda bond expected in 2026, while Pakistan looks to restore credibility and gradually return to international debt markets by 2027.

Exports have also been revised downward, with projections lowered to $31.3 billion against the previously planned $31.7 billion, while imports are forecasted to climb to $57.6 billion, worsening the trade imbalance.

This sobering report sounds a clear call to action: Pakistan must urgently address its agricultural productivity, boost industrial activity, and implement bold reforms to regain economic momentum. The road ahead is challenging, but with steadfast resolve and patriotic commitment, Pakistan can rise above these trials to secure a prosperous future for its people.

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