The International Monetary Fund (IMF) on Tuesday slashed its growth forecast for Pakistan to 2.6 per cent, citing the impact of US tariffs now at 100-year highs and warning that rising trade tensions would further slow growth.
The IMF released an update to its World Economic Outlook compiled in just 10 days after US President Donald Trump announced universal tariffs on nearly all trading partners and higher rates, currently suspended, on many countries. Pakistan was hit by a 29pc tariff on goods it exports to the US, which economists say could bring immediate hurdles but also long-term opportunities.
In January, the IMF had lowered the country’s growth estimate to 3pc for the current fiscal year, down from 3.2pc it had projected previously.
In its latest update, the IMF slashed the growth estimate to 2.6pc for the current fiscal year and 3.6 for the next fiscal year. It also put the inflation estimate at 5.1pc and 7.7pc for the current and next fiscal years.
Separately, Fitch Ratings has projected that Pakistan will gradually devalue its currency to avert likely pressure on the current account as economic activity picks up in the country.
Bloomberg reported that “the ratings company sees the rupee falling to 285 against the dollar by the end of June and weakening further to 295 by the end of the next fiscal year in 2026,” according to Krisjanis Krustins, Director of Asia Pacific Sovereign Ratings at Fitch.
“Pakistan’s central bank will allow the rupee to gradually weaken to manage pressures on the current account as the economy gains pace,” the global media outlet added.
The local currency hit an all-time low of Rs 307.10 against the US dollar in the first week of September 2023, amid a surge in dollar smuggling from Pakistan to neighboring countries.
The government’s crackdown on illegal currency dealers helped the Pakistani rupee recover to around Rs277/USD in the first half of 2024.
The domestic currency has cumulatively depreciated by 0.86%, or Rs 2.43/USD, during the first eight months of the current fiscal year 2024-25. It stood at Rs 280.77/USD on Tuesday, compared to Rs 278.34/USD on June 28, 2024, according to SBP data.
Meanwhile, Pakistan is looking to buy more goods from the United States (US) and remove non-tariffs barriers to escape President Donald Trump’s high tariffs, Finance Minister Muhammad Aurangzeb said in an interview to Bloomberg.
“It’s a bigger canvas that we are looking at in terms of engaging the US,” Aurangzeb said. “We will constructively engage, and we will have a formal delegation coming in.”
Pakistan is looking to buy more cotton and soybean from the US, the finance minister said, adding that it is also in talks to tear down non-trade barriers to open its markets to more US products, according to the report.
“We can also look at if there are any issues with respect to non-tariff discussion, whether there any onerous inspections at our end for US products, we can obviously view that,” he said.
The report further said Islamabad is trying to appease the US to seek reprieve from the 29% reciprocal tariffs imposed by President Donald Trump. While those levies are on hold until July, Pakistan has said it will send a trade delegation to Washington in the coming months to bridge the trade gap.
The minister said the country is also open to foreign direct investments from US firms in its recently opened minerals and mining sectors.
The former banker said the crisis-ridden nation will tap the international capital markets to secure more funds for a sustainable growth.
“What we are looking for is how we get away from a boom and bust cycle which Pakistan has gone through and get on to a sustainable growth path.”
Pakistan is preparing to debut its first-ever Panda bond in the range of $200 million to $250 million that will likely take place in the fourth quarter of this year, the minister added.
Moreover, Aurangzeb has reaffirmed the government’s commitment to achieve “sustainable economic stability” in the country as he held a series of meetings with officials from the International Monetary Fund (IMF) and the World Bank in Washington, a press release from the Press Information Department said on Tuesday.
According to the press release, in a meeting with World Bank Group President Ajay Banga, the finance minister expressed appreciation for the bank’s historical support to Pakistan, particularly the Country Partnership Framework (CPF).
Aurangzeb also held a meeting with IMF Managing Director Kristalina Georgieva, where he expressed gratitude for the global money lender’s staff-level agreement and new arrangements under the resilience and sustainability facility. “The two sides discussed Pakistan’s economic recovery plan, structural reforms, and the future of ongoing programmes,” per the statement.
The minister also attended a luncheon hosted by the US Pakistan Business Council, where Aurangzeb discussed regional trade and market diversification, inviting collaboration in the mining and minerals sector.
The finance minister also met the Assistant Secretary of the US Department of the Treasury Robert Kaproth, Secretary General of the Climate Vulnerable Forum & Vulnerable 20 (CVF-V20), Mohamed Nasheed, Regional Vice President of the International Finance Corporation (IFC) Hela Cheikhrouhou, along with a Deloitte delegation in separately held meetings.
In the meeting with CV-V20 General Secretary, Aurangzeb highlighted that “four of its [CPF] six key outcomes directly address Pakistan’s existential challenges of climate change and population pressures.”
Also, the finance minister has called for greater financial and technical support among developing countries to navigate global economic challenges effectively.
He was delivering statement in the G-24 Finance Ministers and Central Bank Governors’ Meeting in Washington on Tuesday, on the sidelines of 2025 Spring Meetings of the IMF and the World Bank Group.
The Minister highlighted the macroeconomic stability achieved by Pakistan, due to resilience of banking system and government’s ongoing structural reforms.
He emphasized maintaining the reform trajectory in view of evolving geopolitical dynamics, demand fragmentation, rising protectionism, and the risks of spillovers and exogenous shocks, including trade tariffs.
Muhammad Aurangzeb underscored the importance of regional trade corridors, enhanced connectivity, and South-South cooperation as key drivers for increasing investment and trade flows.
