The International Monetary Fund (IMF) has warned that the recent floods in Pakistan could have a negative impact on the country’s economy, potentially slowing growth, worsening inflation, and straining the current account balance.
In its latest Middle East and Central Asia Regional Economic Outlook report, the IMF said that Pakistan’s GDP growth rate for the current fiscal year may drop to 3.6 percent, below the target of 4.2 percent, due to the economic disruption caused by the floods.
Economic indicators likely to worsen
According to the IMF report, the widespread flooding during the third quarter of 2025 is expected to weigh heavily on agriculture, infrastructure, and household incomes, contributing to inflationary pressures and a widening current account deficit.
“Economic growth, inflation, and the current account balance may deteriorate due to the floods,” the report stated, noting that the magnitude of these adverse effects remains uncertain.
The IMF highlighted that while flood recovery efforts are underway, the macroeconomic outlook remains fragile, with rising prices posing a renewed challenge to monetary stability.
Inflation fears resurface
The Fund cautioned that inflation could rise again this year, citing multiple contributing factors.
It attributed this trend to the removal of electricity subsidies, tariff normalization, and supply disruptions caused by the floods.
Pakistan, which had managed to bring inflation down in recent months through tight monetary policy, now faces the risk of price spikes in essential commodities, particularly food and energy.
Despite the looming challenges, the IMF acknowledged Pakistan’s ongoing economic reforms and fiscal improvements.
The report said that continuation of these policies could gradually strengthen the economy, projecting a growth rate of 4.5 percent by 2030 if reforms stay on track.
The IMF emphasized that sustained policy continuity, fiscal prudence, and structural reforms are critical to mitigating climate-related shocks and achieving long-term stability.
