Pakistan, IMF broadly agree on FY27 framework with 4.1% growth, 8.6% inflation target

Pakistan and the visiting International Monetary Fund mission have broadly agreed on the macroeconomic framework for FY2026-27, with the Ministry of Finance projecting real GDP growth of 4.1% and average inflation of 8.6% in the upcoming budget, The News reported, citing official sources. 

The IMF has proposed a primary surplus target of 2% of GDP, equivalent to around ₨2.9 trillion, for the next fiscal year.

Sources said Pakistan proposed a 4.1% growth target against the IMF’s projection of 3.5% for FY27.

Inflation projections also remained under discussion, with the Ministry of Finance estimating average CPI inflation at 8.6% compared to the IMF’s forecast of 8.4%.

Officials said higher fuel prices during the first two quarters of FY27 were a major factor behind the government’s inflation estimates.

Independent economists have warned that inflation could rise to around 11% on average, increasing the possibility of further monetary tightening by the State Bank of Pakistan.

According to the proposed framework, Pakistan’s current account deficit is projected at around $4 billion, or below 1% of GDP, in the next fiscal year.

Exports are projected at $35 billion, imports at $70 billion and workers’ remittances at around $42 billion.

The upcoming budget will also include provincial revenue targets aimed at increasing the tax-to-GDP ratio by an additional 0.3 percentage points, equivalent to ₨400 billion.

The provinces are expected to increase revenue collection mainly through stronger enforcement of GST on services and implementation of new agricultural income tax rates.

Under the plan, agricultural income tax rates introduced for FY26 income will begin generating revenue impact during FY27.

The IMF has also asked provinces to strengthen automation of agricultural income tax procedures, utilise data-sharing arrangements with the Federal Board of Revenue and allocate additional human and IT resources for enforcement.

Finance Minister Muhammad Aurangzeb on Monday held a virtual meeting with provincial finance ministers and economic teams, asking provinces to generate additional revenue measures worth ₨400 billion to help meet the agreed fiscal targets.

According to sources, all provinces have agreed not to introduce policies or measures that could undermine commitments made under the IMF programme. The provinces will also consult the IMF through the federal finance ministry before introducing any policy changes affecting agreed programme targets.