ISLAMABAD: The International Monetary Fund (IMF) has warned that Pakistan may face a new wave of inflation in the coming year as energy subsidies end and power tariffs return to normal levels.

In its Middle East and Central Asia Regional Economic Outlook, the IMF projected that inflation could rise again in fiscal year 2025–26, while economic growth is expected to stay around 3.6% this year.

The report said that the removal of power subsidies and the normalization of tariffs would put additional pressure on consumers. It also warned that regional tensions could slow down overall economic growth across the region.

The IMF added that floods in the third quarter of 2025 could negatively affect Pakistan’s economy. However, the report acknowledged Pakistan’s continued economic reforms and progress toward financial stability.

It further noted improvements in remittances and the current account balance during fiscal year 2024–25, showing signs of gradual recovery despite external challenges.

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