The International Monetary Fund (IMF) has lowered Pakistan’s GDP growth forecast for the outgoing fiscal year 2024-25 to 2.6%, down from its earlier projection of 3.2% in October.
The revision reflects weaker-than-expected economic activity in the first half of the fiscal year, alongside ongoing global uncertainty.
In its latest report titled “First Review under the Extended Fund Facility (EFF) Arrangement, Requests for Modification of Performance Criteria, and Request for an Arrangement under the Resilience and Sustainability Facility (RSF)”, the Fund noted that Pakistan’s economic growth remained subdued in the first half of FY2024.
Year-on-year GDP growth stood at 1.3% in Q1 and 1.7% in Q2, primarily due to reduced yields from key Kharif crops and continued sluggishness in industrial output.
Despite the downgraded growth outlook, current expenditure remains aligned with the IMF program at 18.9% of GDP for the current fiscal year.
For the upcoming fiscal year, the Fund has projected a slightly lower expenditure level of 17.8% of GDP, though it cautioned that meeting this target will depend on achieving the expected 3.6% growth rate in FY2025-26.
The organisation has updated several key economic indicators for Pakistan under its ongoing Extended Fund Facility (EFF) program, reflecting mixed signals from the country’s fiscal and external performance during the outgoing fiscal year 2024-25.
According to the Fund, the Public Sector Development Program (PSDP) was initially projected at 2.3% of GDP, but has since been revised upward to 2.5%. However, this increase appears questionable, as actual disbursements from the Planning Ministry do not support the revised figure.
Defence spending has remained consistent with the budget at 1.7% of GDP for the current fiscal year, and is projected to rise to 1.9% in FY2025-26.
On privatization, the Fund projects zero proceeds for the current year and expects no inflows over the next four years, signaling limited progress on this front.
The IMF report highlights weak performance in major crop yields and continued subdued industrial activity in the first half of the year. However, recent high-frequency indicators suggest an expected pickup in economic momentum in the second half of FY2025 and beyond.
