The Staff Report of the IMF after the completion by the Executive Board of the second review of the IMF Programme contains a set of macroeconomic projections of Pakistan for 2025-26. The objective of this article is to highlight and analyse these projections.

GDP growth rate: The IMF projection for 2025-26 is of a GDP growth rate of 3.2 percent. However, this does not reflect the large negative impact of the floods in the earlier months of 2025-26.

The last floods of 2022-23 had led to a precipitate a fall in the GDP growth to negative 0.2 percent. This was due particularly to the devastation of crops, leading to a fall of 1.2 percent in crop outputs. There is likely to have been a similar impact this year. Already, the fall in cotton output is estimated at over 5 percent.

The manufacturing sector may show a modest recovery, with the growth rate rising to 3 percent. Services will show an intermediate growth rate of 2 to 2.5 percent. Overall, the GDP growth rate in 2025-26 is more likely to be in the range of 2 to 2.5 percent, somewhat below the IMF projection of 3.2 percent.

Unemployment rate: This is a technically questionable projection by the IMF. There are two problems respectively with the level and trend.

The unemployment rate is shown as 8 percent in 2024-25 and declining to 7.5 percent in 2025-26. However, the Population and Housing Census of 2023 has revealed that the unemployment rate was as high as 22 percent. More recently, the 2024-25 Labour Force Survey has estimated it at 7.1 percent. There is, therefore, a wide divergence in the estimates of the unemployment rate in Pakistan.

Also, a GDP growth rate of 3 percent in 2024-25 is highly unlikely to have led to a fall in the unemployment rate, as projected by the IMF. A minimum GDP growth rate of 5 percent is necessary for the unemployment rate to show some decline. It is more likely that there will be double-digit unemployment rate in 2025-26, partly as a consequence of the policy measures sought by the IMF for........

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