The International Monetary Fund (IMF) has cautioned that Pakistan’s economic outlook remains vulnerable to several external and domestic risks, including geopolitical tensions, rising commodity prices, tighter global financial conditions, weaker remittances, and potential social unrest.
In its latest report, the Fund highlighted that the recent floods underscored Pakistan’s high exposure to climate-related disasters. If agricultural losses exceed initial estimates or spillovers to industry and services widen, activity, revenue, inflation and external balances could deteriorate. Additional reconstruction costs could also strain government finances.
The IMF’s warning comes as the Asian Development Bank (ADB) revised Pakistan’s growth forecasts upward for both 2025 and 2026, citing stabilising food prices and stronger-than-expected economic performance.
In its Asian Development Outlook: Growth steadies but uncertainty lingers, ADB said the upward revision for 2026 reflects increased public investment and a milder impact of flooding than previously expected. The government has already updated its own growth estimate for FY2025 to 3%, up from 2.7%, after the economy grew 5.7% in Q4 despite June flood disruptions. Large-scale manufacturing has also shown momentum heading into FY2026.
Pakistan’s inflation fell sharply to 4.7% in the first four months of FY2026, compared with 8.7% a year earlier, partly due to the stabilisation of food prices following the post-flood spike.
At the regional level, ADB raised its growth forecast for developing Asia and the Pacific to 5.1% for 2025 and 4.6% for 2026, supported by strong exports, easing trade uncertainty after new US agreements, moderating inflation, and stable financial conditions.
ADB reiterated that Pakistan continues to face long-term risks linked to economic water scarcity, even as short-term indicators show improvement.
