ISLAMABAD — The International Monetary Fund (IMF) has cautioned that the recent floods in Pakistan could severely affect the country’s economic stability, potentially dampening growth, worsening inflation, and widening the current account deficit.
In its latest Middle East and Central Asia Regional Economic Outlook, the IMF projected that Pakistan’s GDP growth for the current fiscal year could fall to 3.6 percent, below the government’s target of 4.2 percent, due to disruptions caused by widespread flooding.
According to the report, the third-quarter floods of 2025 are expected to heavily impact agriculture, infrastructure, and household incomes — factors that could amplify inflationary pressures and strain the external balance.
“Economic growth, inflation, and the current account balance may deteriorate due to the floods,” the IMF noted, while cautioning that the full extent of the damage remains uncertain.
The Fund observed that while flood recovery and rehabilitation efforts are underway, Pakistan’s macroeconomic outlook remains fragile, with renewed inflationary risks threatening recent progress toward stability.
Inflation, which had eased in recent months due to a tight monetary policy, could rise again as a result of energy tariff adjustments, the withdrawal of electricity subsidies, and supply chain disruptions following the floods.
Despite these challenges, the IMF acknowledged Pakistan’s ongoing fiscal and structural reforms, noting that policy continuity will be essential to preserve hard-won macroeconomic gains and sustain recovery.
