ISLAMABAD: The International Monetary Fund (IMF) has sharply revised down Pakistan’s economic growth forecast to 2.6% for the current fiscal year, citing the adverse effects of record-high US tariffs and escalating global trade tensions.
In a swift update to its World Economic Outlook, released just ten days after US President Donald Trump imposed sweeping tariffs on nearly all trading partners, the IMF warned of significant economic fallout. Pakistan has been particularly affected by a newly imposed 29% tariff on its exports to the United States — a move economists say could pose immediate economic challenges but may also open avenues for long-term reform and diversification.
Back in January, the IMF had already reduced Pakistan’s growth forecast to 3% from an earlier projection of 3.2%. The latest adjustment cuts this further to 2.6% for the current year and forecasts a modest rebound to 3.6% in the next fiscal year. Inflation is expected to reach 5.1% this year and rise to 7.7% in the next.
The IMF’s downgrade underscores growing concern about the ripple effects of the US trade policy shift, particularly for developing economies. A state-owned think tank, the Pakistan Institute of Development Economics (PIDE), issued a stark warning, calling the new tariffs a looming threat to the country’s export sector.
“A storm may be brewing on Pakistan’s trade horizon,” PIDE stated, cautioning that the US’s reciprocal tariffs could trigger severe macroeconomic instability, job losses, and a sharp drop in foreign exchange reserves.
Globally, the IMF trimmed its growth projection by 0.5 percentage points to 2.8% for 2025 and by 0.3 points to 3% for 2026. The outlook noted that inflation, now projected to ease more slowly than expected, will likely reach 4.3% in 2025 and 3.6% in 2026, with significant upward revisions for the US and other advanced economies.
Describing the update as a “reference forecast,” IMF chief economist Pierre-Olivier Gourinchas emphasized the unpredictability of the current global climate. “We are entering a new era as the global economic system that has operated for the last 80 years is being reset,” he told reporters.
The IMF warned that the rapid intensification of trade disputes, combined with unprecedented policy uncertainty, could deal a major blow to global economic performance in the months ahead.
