By Staff Reporter
KARACHI: The International Monetary Fund raised its economic growth forecasts for the Middle East and North Africa region, citing higher oil production among exporters and resilient domestic demand among importers including Pakistan.
Economic activity in the Middle Eastern and North African region and Pakistan has “been stronger than expected” this year, the Washington-based multilateral said in its latest regional economic outlook released Tuesday. It now sees growth of 3.2% this year in the MENA region and 3.7% in 2026 — 0.7 and 0.3 percentage points higher, respectively, than its previous projections in May.
“Economic activity in the MENA region and Pakistan has been stronger than expected,” Jihad Azour, IMF director for the Middle East and Central Asia, said in the report. “We now project growth of 3.2% in 2025, up from 2.1% in 2024, and higher than our April forecast.”
Oil exporters have benefited from higher oil output following the faster unwinding of OPEC+ cuts, Azour added. Oil importers and Pakistan, meanwhile, have gained from low energy prices, strong remittances and a vibrant tourism sector, all supporting domestic demand.
Addressing a press conference, Azour said that despite the year marked by trade tensions and regional conflict, the economies of the Middle East, North Africa, Pakistan, and the Caucasus in Central Asia have shown resilience. The growth has held better than expected, and the impact of higher U.S. tariffs and geopolitical tensions has been short-lived. “Looking ahead, growth is expected to rise to 3.7% in 2026, while inflation should remain moderate, helped by lower food and energy prices and tight monetary policies,” he said.
The inflation trend remains mixed, easing in most MENA economies and Pakistan but accelerating and still elevated in many CCA countries due to robust demand and important price pressures, Azour noted. “Overall, the outlook is positive but not without risks. In MENA and Pakistan, growth should continue to strengthen, supported by reforms and resilient domestic demand.”
Pakistan’s growth is projected to increase to 3.6% in 2026, “supported by steady reform implementation and improving financial conditions and confidence,” according to the report. While inflation in Pakistan has “decelerated significantly this year thanks to lower food and energy prices, it is expected to increase in 2026 on account of the normalisation of these prices and the phasing out of short-term electricity subsidies,” the IMF said.
The IMF, however, warned that severe flooding during the third quarter of 2025 may have more adverse effects on growth, inflation, and the current account than currently estimated, although these impacts remain highly uncertain.
The Fund has projected an increase in exports of goods and services from $40.7 billion in 2025 to $42.1 billion in 2026. Further significant increase has been projected in imports of goods and services for Pakistan from $70.1 billion in 2025 to $74 billion in 2026.The Fund has projected the government fiscal balance for Pakistan at -4.1 percent of GDP for 2026, compared to -5.3 percent in 2025.
The Fund has projected an increase in total gross external debt from $30.1 billion in 2025 to $30.6 billion in 2026. Gross official reserves are projected to increase from $14.5 billion in 2025 to $17.7 billion in 2026. The Fund stated that higher borrowing costs may exacerbate fiscal and financial vulnerabilities across the two regions, particularly in economies with elevated projected government gross financing needs and banking sectors that hold relatively large shares of sovereign bonds on their balance sheets (Algeria, Egypt, Pakistan).In the Middle East, North Africa, Afghanistan, and Pakistan region (MENAP), oil importers, cyclically adjusted primary fiscal balances are projected to improve, as tax policy and tax administration reforms help mobilize tax revenues (Egypt, Jordan, Morocco, Pakistan) and energy subsidy reforms help contain spending (Egypt, Morocco, Pakistan).
Building resilience against future shocks and seizing opportunities in the evolving global trade landscape would also require an acceleration of structural reforms. Recent reforms have played a significant role in sustaining growth across the MENAP and the Caucasus and Central Asia (CCA) regions. Reforms have included tax and energy sector measures in Pakistan, energy price reform in Uzbekistan, and diversification agendas in Jordan, Morocco, and Saudi Arabia. These initiatives have strengthened resilience and supported durable, private-sector-led growth. Nonetheless, further progress is needed in several longstanding and emerging areas.
In the MENAP region, remittances continued to accelerate in 2025, particularly in Egypt and Pakistan, contributing to improvements in current account balances. Among MENAP oil importers, growth in 2025 benefited from strong tourism inflows (Egypt, Morocco, Tunisia), a rebound in agricultural production (Jordan, Morocco, Tunisia), rising infrastructure investment (Morocco), and resilient remittances (Egypt, Jordan, Pakistan).
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