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IMF Warns Pakistan: Circular Debt Breach, Rising Inflation, Gulf Conflict Risks Loom
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News18•03-10-2026, 14:22
IMF Warns Pakistan: Circular Debt Breach, Rising Inflation, Gulf Conflict Risks Loom
- •The IMF has flagged a breach in Pakistan's power sector's circular debt target, exceeding Rs1.675 trillion by June 2026.
- •The IMF's first draft of the Memorandum of Financial and Economic Policies (MEFP) has been shared with Pakistani authorities for negotiations.
- •The IMF projects a current-account deficit of up to $4 billion for FY2027, higher than Pakistan's Finance Ministry estimate of $2.7 billion.
- •A prolonged Gulf conflict could significantly increase oil-import costs and pressure Pakistan's trade, exports, and remittances.
- •Inflation and energy costs remain key concerns, with the Middle East conflict potentially driving up commodity and fuel prices, impacting growth and the current account.
Key Questions Answered
The power sector's circular debt stood at approximately Rs1.675 trillion at the end of June 2026, which exceeded the agreed target set by the IMF.
The IMF is projecting a current-account deficit of up to $4 billion for FY2027, which is higher than the Pakistan Finance Ministry's estimate of about $2.7 billion.
A prolonged Gulf conflict could increase oil-import costs and place additional upward pressure on inflation, trade, exports, and remittances.
