Beyond the IMF baseline: Pakistan’s hard fiscal choices in FY27 budget

On April 27, the State Bank of Pakistan (SBP) raised the policy rate by 100 basis points to 11.5%, its first hike since June 2023. On May 14, the International Monetary Fund (IMF) published Country Report 26/101, projecting fiscal year 2026-27 (FY27) growth at 3.5%, average inflation at 8.4%, a current account deficit of 0.9% of gross domestic product (GDP), gross reserves rising toward $21 billion, and an underlying primary surplus of 2% of GDP. The two documents are seventeen days apart, yet they seem to describe two different countries. The gap exists because the IMF baseline was built before the Iran-US war had fully transmitted into Pakistan’s inflation, import and energy channels. The staff report acknowledges downside risk but does not quantify it.