How renewed confidence meets persistent economic headwinds in Pakistan’s fragile rebound

By Ali Yasir PakUpTech | November 2025

Pakistan’s economy is showing renewed signs of stability after a turbulent few years — but it’s not all smooth sailing. According to the IMF’s latest outlook, growth is expected to improve significantly in the near term, though climate-related shocks and inflation risks still loom large. Geo News+2Geo News+2

The IMF recently raised its projected growth for Pakistan to 3.6% for the upcoming fiscal year, up from earlier, more conservative estimates. Geo News This projection comes despite serious financial risks emerging from the floods of 2025, which have the potential to derail both growth and macro stability. Geo News The IMF’s assessment points to ongoing reform momentum, stronger market confidence, and gradual macro stabilization. Geo News

But that’s not the only international institution weighing in. The UN, in its economic forecast, projects that Pakistan should grow by 2.3% in 2025 amid continuing fiscal consolidation. Dawn The UN sees disinflation as a driver for business confidence, though it warns that deep structural issues — such as a narrow tax base and high external debt — could limit the strength of the recovery. Dawn

Meanwhile, the World Bank also reinforced a cautious but positive outlook. In its most recent Pakistan Development Update, the Bank estimated that GDP will grow by around 3.0% in FY 2026, though it noted that recent floods could weigh on agricultural output, which remains a key growth driver. World Bank The report underscored that sustained reform — especially in revenue mobilization and energy sector restructuring — is crucial to maintain momentum. World Bank

On the inflation front, the IMF has issued a somewhat sobering forecast. After a sharp drop, inflation is expected to rise again, with consumer prices projected to climb to 6% in FY 2025-26. Geo News This presents a tricky balancing act: while growth improves, price pressures could erode that very momentum, especially for vulnerable households.

What’s driving this cautiously optimistic recovery? For one, Pakistan’s fiscal discipline is improving under its IMF Extended Fund Facility (EFF) program. IMF+1 The country has already drawn down a portion of the facility, and officials are pulling through with structural reforms: tax base expansion, SOE reform, and energy-sector overhauls are all on the policy agenda. IMF

The IMF is also backing Pakistan’s climate resilience efforts, backing a $1.4 billion Resilience & Sustainability Facility (RSF) to help mitigate natural disasters and climate shocks. IMF Given Pakistan’s vulnerability to flooding, this could be a critical lever for long-term stability.

Yet, risks remain. The very floods that threaten growth could also increase fiscal pressures. Lower agricultural output, rising reconstruction costs, and potential relief spending may force the government to make tough choices. In addition, the projected inflation uptick could squeeze consumers and constrain private sector recovery if not managed carefully.

So here’s the real question: can Pakistan maintain its reform momentum, build buffer capacity against natural shocks, and deliver inclusive growth? If it can, the IMF’s upgraded forecast might be more than just optimism — it could mark a meaningful turning point in a fragile but hopeful economic rebound.