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IMF Flags Pakistan's Mounting Economic Woes: Circular Debt, Inflation Soar
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News18•03-10-2026, 10:44
IMF Flags Pakistan's Mounting Economic Woes: Circular Debt, Inflation Soar
- •The IMF has flagged a breach in Pakistan's power sector's circular debt target, which stood at PKR 1,675 billion by June 2026, exceeding the agreed-upon limit.
- •The IMF is pushing for Pakistan's current account deficit to be projected at up to $4 billion for the current fiscal year, citing rising external risks despite a lower deficit in the first two months.
- •A prolonged conflict in the Gulf poses a significant threat to Pakistan's external sector, potentially disrupting trade, exports, and crucial remittance inflows from Pakistani workers in the region.
- •The IMF expects Pakistan's average inflation to remain elevated between 8.5% and 9.5% during FY2026-27, driven by higher energy costs and external-sector pressures.
- •Pakistan's target of 4% GDP growth for the current fiscal year faces risks from persistent inflation and mounting external-sector pressures, complicating economic stabilization efforts.
Key Questions Answered
Pakistan's power-sector circular debt stood at PKR 1,675 billion at the end of June 2026, which breached the agreed target with the International Monetary Fund (IMF) and led to fresh economic pressure.
The IMF is pushing for Pakistan's current account deficit to be projected at as much as $4 billion for the ongoing fiscal year.
The IMF expects average inflation in Pakistan to remain elevated in the range of 8.5% to 9.5% during FY2026-27 due to higher energy costs and external pressures.
