Pakistan is heading toward the International Monetary Fund’s (IMF) September 2026 review with most of its key programmed targets expected to be on track. According to Arif Habib Limited (AHL), six of the seven quantitative performance criteria are likely to have been met at the March and June 2026 test dates.
The IMF review will cover Pakistan’s progress under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). A successful review would strengthen confidence in Pakistan’s economic reforms and reduce the risk of delays in future programmed support.
Fiscal Challenges Remain
Despite progress on IMF targets, Pakistan faces growing fiscal pressure in FY27. AHL expects the fiscal deficit to increase to 3.9% of GDP, compared with 2.6% in FY26.
Interest payments are expected to rise sharply to around Rs8.5 trillion, up 22% from the previous year. Higher borrowing costs and increased government spending could make fiscal management more difficult.
Tax collection is another concern. The Federal Board of Revenue missed its FY26 target by around Rs1.1 trillion, raising questions about whether revenue targets for FY27 can be achieved.
Inflation and External Pressures
Inflation is projected to average 8.22% in FY27, with the annual rate potentially reaching nearly 9.5% early in the year before easing later.
Pakistan’s current-account deficit is also expected to widen to 0.78% of GDP, mainly because imports are projected to grow faster than exports. However, record workers’ remittances remain an important source of support, reaching $41.6 billion in FY26.
Oil prices will be particularly important. Higher global energy prices could increase inflation and put additional pressure on Pakistan’s external account.
Growth and Investor Confidence
AHL forecasts Pakistan’s GDP growth at 3.84% in FY27, slightly above the 3.70% recorded in FY26. Growth is expected to be led by industry, while agriculture could face challenges from weaker-than-targeted wheat production.
Pakistan has also received a boost from international rating agencies. S&P and Moody’s recently upgraded the country’s credit ratings, while Fitch maintained its existing rating. The successful launch of Pakistan’s first Panda Bond also signals improving access to international capital markets.
The Road Ahead
The September IMF review is likely to focus more on Pakistan’s consistency in implementing reforms than on introducing new commitments. While the country appears well placed to clear the review, FY27 will be a tougher test.
Pakistan now needs to control inflation, improve tax collection, manage rising interest costs and protect its external reserves while maintaining economic growth.
The immediate IMF outlook is encouraging, but the real challenge will be turning recent economic stability into sustainable long-term growth.