Pakistan's GDP Growth to Miss IMF Target Amid Export Slump, Flood Damage

The article in the Business Recorder by eminent Pakistani economist Hafiz Pasha points out that the country's exports have plunged by as much as 14.5 per cent in November 2025 and by 6.2 per cent in the first five months. In particular, there has been a fall in exports of rice by 49 per cent, with volume falling by 40 per cent. This indicates that the fall in rice output may have been larger than anticipated. Also, exports of textiles have shown little growth.

The above trends indicate that the expectations of the GDP growth rate by the Planning Commission and the IMF are somewhat on the high side. A more likely projection of the GDP growth rate in 2025-26 is 3 per cent. This will imply that the rate of unemployment could rise by 1.2 percentage points in 2025-26. The number of unemployed could increase by almost 1 million, the article stated.

The IMF projection of the GDP growth rate in 2025-26 is at 3.2 per cent. This is also a reflection of the lowering from the original estimate of 3.6 per cent, presumably again because of the negative impact of the floods.

The article also points out that the Annual Plan expects the level of gross fixed capital formation in Pakistan to rise to 13 per cent of the GDP, from 12 per cent of the GDP in 2024-25. The bulk of the increase is anticipated from private investment.

The IMF also expects the level of fixed investment to rise to just above 13 per cent of the GDP. It, however, anticipates government investment to fall by 0.2 per cent of the GDP.

The article highlighted that the outstanding bank credit to the private sector as of November 2025 has shown a small decline of 2 per cent since November 2024. This has happened despite the relatively low interest rates. However, this drop in credit to the private sector is not reflected in imports of machinery. They have shown a big increase of 13.5 per cent. With the exception of power-generating machinery, all other types of machinery imports have increased.

It further states that there has been an increase in development expenditure by the federal and provincial governments combined of only 6 per cent. It stands at less than 0.3 per cent of the GDP in the first quarter of 2025-26.

"Overall, it appears that the target of gross fixed capital formation of 13 per cent of the GDP will become difficult to achieve. It is likely to be closer to 12.5 per cent of the GDP. The shortfall is likely in public investment, especially in light of the big and growing shortfall in tax revenues," the article stated.

The article also pointed out that the first months of 2025-26 have witnessed a somewhat rising trend in the rate of inflation, from 4.1 per cent in July 25 to 5.6 per cent in December 2025. As such, the average rate has been close to 5 per cent, 0.5 percentage points above last year's average. There is a noticeable upsurge in prices of wheat and wheat flour, sugar, gas charges and fresh fruits of above 20 per cent. Fortunately, there has been a significant fall in prices of pulses, potatoes, tea, and electricity charges.

However, the sharp rise in inflation in Pakistan has come at a time when International prices have shown a visible downward tendency. The World Bank International Commodity Price Index has declined by almost 7.0 per cent in July - September 2025, as compared to the level in July - September 2024, the article added.

- IANS