The International Monetary Fund (IMF) released a report on the Middle East and Central Asia region stating that Pakistan's external financial position may weaken due to rising imports and moderating remittances. The IMF noted that while external positions should strengthen in Egypt, Jordan and Morocco over the medium term, they are expected to decline in Pakistan as imports increase and remittances moderate.
Staff-level agreement was reached for the disbursement of a $1 billion fifth loan tranche. Government projections estimate imports will reach $70 billion this fiscal year, while remittances are expected to grow to $45.5 billion.
The IMF projected Pakistan's current account deficit at 1% of gross domestic product (GDP), or around $4.5 billion, whereas the government estimated the deficit at approximately $2.5 billion. Gross financing needs for Pakistan are estimated by the IMF to be around 22% to 25% of GDP.
Commercial banks currently have 63% exposure to public debt, according to the IMF. Inflation in Pakistan was 11.1% year on year in August, but the IMF projected the rate to rise to 9.9%.
The IMF stated, "Countries should stand ready to tighten monetary policy, particularly where inflation is already above target and the policy stance appears accommodative, with ex-ante policy rates below estimated neutral levels, a combination most evident in the Kyrgyz Republic and Pakistan." The current interest rate stands at 11.5%.
Pakistan was the only country with flexible exchange rates to raise interest rates after the conflict began, according to the IMF. The IMF kept its economic growth forecast for Pakistan unchanged at 3.5%, despite an official growth target of 4%.
Fiscal policy stances in Pakistan are projected to be restrictive in 2026. The rupee appreciated by 1 paisa to Rs276.85 to the dollar on Thursday.
The IMF noted that exchange rate flexibility can help preserve reserves and facilitate external adjustment in Egypt and Pakistan, but may also increase inflationary pressures through higher import prices.
