The decline in Pakistan’s exports and damage from floods are likely to lower the country’s growth rate below the IMF’s projection. Recent data shows a significant drop in exports, especially in rice and textiles. Economist Hafiz Pasha suggests a more realistic GDP growth rate of 3% for 2025-26, which could lead to a rise in unemployment by 1.2 percentage points.
The IMF’s initial estimate of a 3.2% GDP growth rate for 2025-26 has been revised down from 3.6%, possibly due to flood-related impacts. Both the Planning Commission and the IMF may have overestimated growth expectations. The article also highlights a projected increase in gross fixed capital formation to 13% of GDP, with private investment driving most of the growth.
Despite low interest rates, bank credit to the private sector has decreased by 2% since November 2024. Surprisingly, imports of machinery have surged, except for power-generating machinery. Development expenditure by federal and provincial governments has only seen a modest 6% increase, falling short of GDP targets. Inflation has been on the rise, reaching 5.6% in December 2025, driven by price hikes in essential commodities.
The inflation surge in Pakistan contrasts with a global downward trend in international prices. The World Bank International Commodity Price Index dropped by nearly 7.0% in July-September 2025 compared to the previous year. These economic indicators suggest challenges ahead for Pakistan’s growth and investment outlook.
