Pakistani economy is demonstrating a consistent recovery, reveals the latest International Monetary Fund (IMF) report, projecting a 2.6% rate of growth in the current fiscal year.
This positive yet conservative projection marks the beginning of a stronger economic path over the next few years.
In its Pakistan Country Report, the IMF projects that the nation’s GDP growth will climb to 3.6% in FY 2025-26 and further to 4.1% in 2026-27. By 2030, Pakistan could maintain an average growth rate of 4.5%, assuming reforms stay on course.
Inflation tamed, but set to rise slightly
The IMF puts inflation at 5.1% this fiscal year, providing some respite to consumers. Inflation is, however, projected to creep up to 7.7% in the following year before settling at an average of 6.5% for the period 2026-2030.
To manage inflation and budget deficits, the government has pledged strict expenditure controls. These include an Rs87 billion reduction in the Public Sector Development Programme (PSDP), elimination of Rs54 billion in energy subsidies, and a freeze on Rs188 billion in emergency allocations. Despite these cuts, funding for core social sector initiatives will remain protected, with total core spending capped at Rs15,958 billion.
Debt relief in sight
In an encouraging trend, Pakistan’s debt-to-GDP ratio is set to decline from 71.9% in 2025-26 to 61% in 2030—a welcome indicator for global creditors and domestic markets alike. The nation continues to be focused on attaining a primary surplus of 1.0% of GDP, which is vital for financial stability over the long-term.
Tax reforms and revenue ambitions
Tax overhaul is at the centre of the IMF-supported economic plan. The Federal Board of Revenue (FBR) is targeting a revised revenue figure of Rs12,332 billion this year—about 10.6% of GDP.
The government has promised stronger tax enforcement, focusing on:
- Compliance risk management
- Digital value chain monitoring
- Faceless customs assessments
- Detection of anomalies in sales tax filings
Interestingly, the report also lauds provincial tax bodies for outperforming expectations, suggesting a broader base for future revenue growth.
Legal reforms could unlock Rs770 billion
Legal hurdles are the other key area of worry. The government is keenly pursuing the resolution of court cases relating to taxes worth Rs770 billion, most of which are to be heard in May and June.
Pending disputes include:
- Rs43 billion in the Supreme Court
- Rs217 billion in Islamabad, Sindh, and Lahore High Courts
- Rs104 billion in the Inland Revenue Appellate Tribunal
The initial hearings have already been conducted in the Supreme Court, with a possible settlement of Rs120 billion on the cards.
