IMF warns floods may slow Pakistan’s growth

ISLAMABAD: The International Monetary Fund (IMF) has warned that the recent floods in Pakistan could negatively impact the country’s economy, slowing GDP growth, worsening inflation, and adding pressure on the current account balance.

In its Middle East and Central Asia Regional Economic Outlook, the IMF projected Pakistan’s GDP growth rate for the current fiscal year to fall to 3.6 percent, below the government’s 4.2 percent target, as the floods have disrupted agriculture, infrastructure, and livelihoods.

Economic Strain and Inflation Risks

The IMF noted that widespread flooding in the third quarter of 2025 has severely affected agricultural output and household incomes, likely leading to increased inflation and a widening current account deficit. “Economic growth, inflation, and the current account balance may deteriorate due to the floods,” the report stated, emphasizing that the full scale of damage remains uncertain.

The Fund further highlighted that recovery efforts are underway but the macroeconomic outlook remains fragile. Inflationary pressures are expected to resurface due to the removal of electricity subsidies, tariff adjustments, and supply disruptions.

Fiscal Outlook and Reforms

Despite the short-term challenges, the IMF acknowledged Pakistan’s commitment to structural reforms and fiscal discipline under its ongoing stabilization program. The report projected that with consistent reforms, Pakistan’s growth could reach 4.5 percent by 2030, provided fiscal prudence and climate resilience measures remain a priority.

Long-Term Outlook

The IMF stressed the importance of policy continuity and investment in climate adaptation to mitigate future shocks. It urged authorities to focus on rebuilding flood-affected regions while maintaining macroeconomic stability.