The International Monetary Fund (IMF) has cut Pakistan’s economic growth forecast for the next fiscal year to 3.5 percent and sharply raised its inflation projection to 8.4 percent, reflecting mounting risks from the ongoing conflict in the Middle East and its impact on energy prices.
In its latest World Economic Outlook (WEO), released Tuesday on the sidelines of the spring meetings, the Fund also more than doubled the projected current account deficit for fiscal year 2026-27 to 0.9 percent of GDP, or about $5 billion, signalling higher external financing pressures.
For the current fiscal year, the IMF maintained Pakistan’s economic growth estimate at 3.6 percent, while revising the inflation outlook upward to 7.2 percent, compared with an earlier projection of 6.3 percent. The Fund noted that Pakistan is particularly exposed to regional instability, as the country sources roughly 90 percent of its energy imports from the Middle East, increasing vulnerability to supply disruptions and price volatility.
The lender stressed, however, that it does not foresee any major adverse economic impact from the conflict during the ongoing fiscal year.
Globally, the IMF lowered growth projections for the next two years, warning that escalating tensions could disrupt commodity markets and tighten financial conditions. Under its baseline outlook, global economic expansion is expected to slow to 3.1 percent in 2026 and 3.2 percent in 2027, compared with a recent average pace of about 3.4 percent, while global headline inflation is projected to rise to 4.4 percent in 2026 before easing to 3.7 percent in 2027.
Under an adverse scenario involving sustained energy price increases, global growth could decelerate further to 2.5 percent in 2026, with inflation rising to 5.4 percent. In this case, oil prices are assumed to surge by 80 percent beginning in the second quarter of 2026, averaging around $100 per barrel in 2026 before moderating to roughly $75 per barrel in 2027.
In a more severe conflict scenario involving significant damage to energy infrastructure, global growth could fall to about 2 percent in 2026, while inflation would exceed 6 percent by 2027. Oil prices in this case are projected to rise by 100 percent, averaging approximately $110 per barrel in 2026 and $125 per barrel in 2027, with natural gas prices in Europe and Asia potentially increasing by as much as 200 percent.
The IMF noted that global growth falling below the 2 percent threshold would signal a near-recession environment, a situation recorded only four times since 1980, including during the global financial crisis and the COVID-19 pandemic.
Separately, the WEO projected that global energy prices would rise by 19 percent in 2026, reversing the decline anticipated in the October 2025 edition of the report, while oil prices alone are expected to increase by 21.4 percent, averaging about $82 per barrel due to disruptions to production and transportation in the Middle East.
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