IMF urges Pakistan to keep inflation between 5% and 7%

The International Monetary Fund (IMF) has emphasised the need for Pakistan to maintain inflation down to a target range of 5% to 7%, as part of ongoing negotiations over the country’s fiscal and economic policies for the 2025-26 budget.

In an official statement released after the IMF mission's visit to Pakistan, the global lender said, “In this context, maintaining an appropriately tight and data-dependent monetary policy remains a priority to ensure inflation is anchored within the central bank’s medium-term target range of 5–7 per cent,” Porter stressed.

The Fund acknowledged constructive discussions with Pakistani authorities and reaffirmed continued dialogue in the coming days.

Read: IMF delegation reaches Pakistan to review governance

The IMF highlighted key areas for reform, including a primary surplus target of 1.6%, restoration of foreign exchange reserves, and maintaining a flexible, market-based exchange rate to absorb external shocks.

The mission also urged a tighter monetary policy, encouraging the State Bank of Pakistan to make decisions with inflation control as a priority.

“At the same time, rebuilding foreign exchange (FX) reserve buffers, preserving a fully functioning FX market, and allowing for greater exchange rate flexibility are critical to strengthening resilience to external shocks.”

The statement noted discussions around reducing energy costs and implementing foundational reforms to stimulate economic growth.

Read: Pakistan govt accelerates right-sizing to meet IMF targets

IMF noted that policies' goal was to create a robust and sustainable economic policy framework that leaves no gaps, the IMF noted.

The Fund called for enhanced tax revenue in the upcoming budget and expressed interest in consultations on spending priorities. It also emphasised the importance of aligning fiscal and monetary measures to ensure stability.

IMF mission chief Nathan Porter expressed appreciation for the cooperation of federal and provincial governments and lauded Pakistan’s commitment to economic stability.

He reaffirmed that the talks would continue in a constructive and positive atmosphere.