IMF cuts Pakistan's growth forecast to 2.6% amid Tariff shocks

April 23, 2025 (MLN): The International Monetary Fund (IMF) has revised Pakistan’s economic growth projection downward to 2.6% for the current fiscal year, citing the ripple effects of unprecedented US tariffs and escalating global trade tensions.

The latest figures were shared in an updated World Economic Outlook released on Tuesday, just ten days after US President Donald Trump imposed sweeping tariffs on nearly all trading partners, a move the IMF calls a “historic shift” in trade policy.

The new 29% tariff levied on Pakistani exports to the United States is expected to significantly dent the country's trade performance.

Analysts believe the immediate aftermath may be disruptive, though some see potential in long-term realignment and market diversification.

Earlier in January, the IMF had already trimmed Pakistan’s growth projection to 3% from its initial forecast of 3.2%. With this latest update, the outlook has been cut further to 2.6% for FY25, while growth for the next fiscal year is projected at 3.6%.

Inflation is also expected to edge higher, with the IMF estimating a rise to 5.1% for the current fiscal year and 7.7% in the next.

The Pakistan Institute of Development Economics (PIDE), a state-owned think tank, issued a stark warning, stating that the new trade barriers could “shatter” the country's export sector. “A storm may be brewing on Pakistan’s trade horizon,” PIDE noted, urging policymakers to accelerate efforts towards export diversification.

The think tank cautioned that these developments could trigger macroeconomic instability, job losses, and a steep decline in foreign exchange reserves.

Global picture also dims

The IMF also downgraded its global economic outlook amid the shifting trade environment. Global growth is now expected to reach 2.8% in 2025, 0.5 percentage points lower than earlier projections. For 2026, growth is pegged at 3%, down from the earlier estimate of 3.3%.

Inflation forecasts have also been revised upward, with global prices projected to ease more gradually than expected.

Inflation is now seen at 4.3% in 2025 and 3.6% in 2026, with notable increases in the US and other advanced economies due to the impact of tariffs.

Describing the projections as a “reference forecast,” the IMF highlighted the volatile nature of current global developments, noting that the data was compiled up to April 4.

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