Pakistan tells IMF Middle East conflict will have limited further impact

Pakistan has told the International Monetary Fund (IMF) that the economic impact of the Middle East conflict is expected to ease, with inflation projected at around 7.5% and the external sector remaining broadly stable, according to government officials.

 

The government expects the exchange rate to remain stable and does not currently anticipate a devaluation. It has also projected exports at $34 billion and remittances at $45.5 billion for FY2027, while the current account deficit is estimated at $2.5–3 billion, below the budget target of $3.6 billion.

 

The authorities said inflation could remain elevated through December before moderating gradually in the second half of the fiscal year. If Brent crude averages around $80 per barrel, inflation is projected at 7.5%; however, an oil price of around $100 per barrel through December could push the annual rate to 8.2%.

 

Pakistan’s central bank has maintained that its current policy rate of 11.5% is sufficiently tight to contain inflation. However, sources said the IMF has urged authorities to maintain a market-based exchange rate and consider tighter monetary policy if required to control price pressures.

 

The government said exchange-rate stability, stronger agricultural output, administrative measures and a favourable base effect could help moderate inflation.

 

On the external front, goods imports are projected at $69–70 billion, broadly in line with the annual target. Meanwhile, remittances rose 14.7% during the first two months of FY2027 and are expected to reach $45.5 billion for the full year.

 

The government also expects economic growth to reach its 4% target, although it acknowledged that higher oil prices, supply disruptions and renewed global inflationary pressures remain downside risks.