Moaaz Manzoor

The International Monetary Fund (IMF) has lowered Pakistan’s growth forecast to 3% for the current fiscal year, citing structural challenges in manufacturing and agriculture while underscoring the need for urgent policy reforms to drive sustainable economic recovery, WealthPK reports.

The Fund has revised Pakistan’s economic growth estimate for the current fiscal year, lowering it from 3.2% to 3% in its latest World Economic Outlook Update. This adjustment comes just weeks before Pakistan’s scheduled negotiations for a $7 billion Extended Fund Facility (EFF). While the IMF has maintained its growth projection for FY2026 at 4%, the downgrade highlights persistent structural challenges in the economy, with key sectors such as manufacturing and agriculture continuing to face significant pressure.

Speaking with WealthPK, Dr. Sajid Amin Javed, Deputy Executive Director Sustainable Development Policy Institute (SDPI), noted that the growth rate was expected to hover around 3.25%, but it could decline further due to the persistent challenges. He highlighted that the manufacturing sector has consistently underperformed, with negative growth trends undermining the overall economic recovery.

“The manufacturing sector is a key contributor, but it has not been able to stabilize or recover, prompting the IMF to downgrade its projections. I believe growth will remain in the 3.2% to 3.5% range, depending on how the agriculture sector performs. If agriculture faces significant setbacks, as it did with last year’s wheat crop, growth could stagnate closer to 3%,” he explained.

Similarly, Dr. Nasir Iqbal, Head of Macro Policy Lab at the Pakistan Institute of Development Economics (PIDE), stressed the need for immediate policy interventions to address structural issues in the industrial sector. “We might achieve a modest growth of around 3% by 2025, but the industrial sector’s low growth remains a critical bottleneck. Agriculture plays an important role in sustaining the economy, but without a robust industrial base, the services sector cannot achieve significant growth,” he stated.

Dr. Iqbal emphasized that the industries accounting for over 20% of the economy required urgent attention. “The government needs to focus on addressing the industrial concerns in the next six months to incentivize investment and create a more conducive business environment,” he added. Pakistan’s economic challenges are not limited to sectoral performance but are also tied to broader structural reforms. The IMF’s growth projections reflect its concerns about these unresolved issues, which continue to weigh on the country’s economic trajectory.

With the manufacturing sector unable to recover and agricultural productivity vulnerable to climate-related disruptions, the outlook remains uncertain. While modest improvements are possible, much will depend on the government’s ability to implement effective policies addressing the root causes of economic stagnation. Though Pakistan’s economic outlook remains fragile, there is potential for recovery with the right reforms and timely action.

Credit: INP-WealthPk