Pakistan unlikely to achieve IMF’s projected 3.2% GDP growth, say experts

ISLAMABAD: Pakistan is unlikely to achieve the International Monetary Fund’s (IMF’s) projected 3.2 percent GDP growth for the current fiscal year as exports and investments continue to weaken.

This was the consensus among leading economists while talking to Business Recorder, who forecast a GDP growth more likely to remain between 2.5 percent and 3 percent, provided macroeconomic stability is maintained and no major shocks emerge.

Former Finance Minister Dr Hafeez Pasha said the government was under pressure to project higher growth figures, calling recent sectoral growth patterns unrealistic.

READ MORE: IMF lowers Pakistan’s growth outlook

“GDP growth is expected to hover around 3 percent — a moderate outcome,” Pasha said, adding that the reported 3.1 percent growth in fiscal year 2025 was driven by an extraordinary over 28 percent expansion in the power sector and 9.9 percent growth in public administration. “This implies higher public spending and more government hiring, which directly contradicts the government’s contractionary and austerity policy,” he said.

Former Finance Ministry Advisor Dr Ashfaque Hassan Khan projected GDP growth in the 2.5–3 percent range, citing weak exports, collapsing investment and stagnant agriculture.

“Exports-oriented industries are under stress, capital investment is at a 50-year low, and no major turnaround is visible in agriculture,” Khan said. “If industry is not growing, exports are shrinking and investment is not coming in, where will growth come from?”

He noted that while the National Accounts Committee (NAC) estimated 3.71 percent growth in the first quarter of current fiscal year 2025-26, the quarterly GDP framework remains weak and unfirmed.

Khan added that IMF global economic projections are also likely to be revised downward due to escalating trade and tariff wars. “There is chaos and uncertainty in international markets,” he said adding that “The IMF often uses the word ‘resilient’ — a diplomatic term meant to avoid market panic as major governments are involved.”

IMF cut Pakistan’s GDP growth forecast to 3.2 percent, down from 3.6 percent projected in its October 2025 World Economic Outlook. The Fund projected global growth of 3.3 percent in 2026 and 3.2 percent in 2027.

According to the State Bank of Pakistan (SBP), Foreign Direct Investment (FDI) plunged 43 percent in the first half of fiscal year 2026, falling to $808 million from $1.425 billion in the same period last year — a decline of $616 million.

Exports fell 8.7 percent to $15.18 billion during the first half of fiscal year 2026, compared to USD16.63 billion last year, while imports surged 11.28 percent to USD34.4 billion.

Exports declined for the fifth consecutive month, plunging 20.41 percent year-on-year in December, pushing the trade deficit to USD19.20 billion in the first half of the fiscal year.

In December 2025, exports stood at USD2.32 billion, down from USD2.91 billion a year earlier — a drop of USD594 million. Month-on-month, exports slipped 4.26 percent from USD2.42 billion in November.

With exports shrinking, investment drying up and industrial output under pressure, Khan cautioned that achieving even moderate growth will remain a challenge in the months ahead.

Dr Khaqan Najeeb former advisor Ministry of Finance, however said that IMF’s 3.2 percent GDP growth projection appears achievable. Inflation has declined sharply, external accounts are relatively stable and financial conditions are gradually easing. These developments support a moderate recovery in economic activity, provided macroeconomic discipline is maintained and no major external or domestic shocks emerge.

“We expect GDP growth to fall in the 3.0–3.75 percent range. Lower inflation, improving external stability and an expected easing in monetary policy should support activity in the second half of the year. However, weak investment, subdued exports and structural constraints will continue to limit the pace of recovery”, he added.

Dr Najeeb further said that weak exports and declining investment are key drags on growth. Exports drive industrial output and employment, while investment underpins future productive capacity. Together, these trends suppress current demand and constrain medium-term growth, unless offset by lower interest rates, improved energy affordability and targeted competitiveness reforms.

He further said that global growth of around 3.2–3.3 percent appears achievable, supported by technology investment, accommodative financial conditions and continued policy support in major economies. These factors have largely offset the impact of tariffs and trade policy shifts. Global inflation is easing, though US disinflation may be slower.

Nonetheless, downside risks persist, particularly from geopolitical tensions and a potential reassessment of technology-led growth expectations, underscoring the need for fiscal rebuilding, policy stability and structural reforms, Dr Najeeb added.

Copyright Business Recorder, 2026