IMF official warns Middle East conflict to slow growth, raise risks for Pakistan

• MENAP outlook flags energy, trade and remittance pressures, urges fiscal discipline and targeted support

The Resident Representative of the International Monetary Fund (IMF) in Pakistan, Dr Mahir Binici, has said that the ongoing Middle East conflict is likely to create a significant economic slowdown and heightened risks across the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region.

He was speaking at an outreach session at the Sustainable Development Policy Institute (SDPI), where he presented the IMF’s April 2026 Regional Economic Outlook Update for the MENAP region, said a press release.

Dr Binici said the outbreak of war on February 28 had triggered a severe and multifaceted shock, disrupting energy markets, trade routes and financial conditions, particularly around the Strait of Hormuz. These developments, he said, have also affected global logistics, as well as food and fertiliser prices, leading to a sharp slowdown in regional growth with downside risks.

Dr Binici said that for oil-importing economies like Pakistan, the conflict has compounded existing vulnerabilities through higher energy and food import costs, a potential decline in remittances from Gulf-based workers and tighter financial conditions.

He also emphasised that achieving macroeconomic stability requires rebuilding fiscal and external buffers, along with protecting vulnerable segments through targeted and temporary support measures instead of broad-based subsidies.

Appreciating that Pakistan’s performance under the IMF’s Extended Fund Facility (EFF) programme has remained broadly on track, he said a staff-level agreement on the third review under the EFF and the second review under the Resilience and Sustainability Facility (RSF) had been reached in March.

He further said policy priorities for Pakistan include maintaining a prudent fiscal stance, ensuring a tight and data-driven monetary policy and advancing structural reforms.

Over the medium term, Dr Binici stressed the need to strengthen economic resilience through diversified trade routes, investment in critical infrastructure, enhanced regional cooperation and reforms to promote private sector-led inclusive growth. He added that continued implementation of reforms would be crucial for Pakistan to maintain stability and navigate an increasingly volatile regional and global environment.

Earlier, welcoming the IMF Country Resident Representative, SDPI Executive Director Dr Abid Qaiyum Suleri said the discussion aimed to assess evolving regional and global dynamics and their implications for Pakistan’s economy. The next tranche under the IMF programme is pending review by the Fund’s Executive Board, he added.

Dr Suleri said Pakistan remains vulnerable to regional and global shocks due to limited preparedness, urging a shift away from blanket subsidies towards targeted and anticipatory social protection policies. He also called for policy focus on energy sector reforms, including negotiations on capacity payments and greater reliance on renewable sources.