Middle East Tensions Increase Economic Risks and Uncertainty for Pakistan

Middle East tensions are creating new economic risks and uncertainty for Pakistan. Government officials shared this concern during a virtual review meeting with the International Monetary Fund (IMF).

Officials explained that the ongoing conflict involving the United States, Israel, and Iran could affect Pakistan’s economy. Rising fuel prices are one of the main concerns, as they may push inflation higher in the coming months.

According to the briefing, some economic indicators in Pakistan have started to improve. However, officials said uncertainty remains due to global developments linked with Middle East tensions.

Pakistan informed the IMF that core inflation reached 7.6 percent in February 2026. Authorities warned that inflation may rise further because of increasing food, fuel, and energy prices.

Economic growth for the current fiscal year is expected to reach around 4 percent. This is slightly lower than the government’s earlier target of 4.2 percent.

Officials also discussed Pakistan’s foreign exchange reserves during the meeting. The IMF has set a target of $18 billion in reserves by June.

At present, the State Bank of Pakistan holds $16.3 billion in reserves.

Remittances are expected to remain stable despite Middle East tensions. Officials estimate that overseas Pakistanis may send around $43 billion in remittances this year.

Meanwhile, the current account deficit is projected to remain near $2 billion.

During the talks, the government also shared several proposed tax changes that require IMF approval.

These proposals include:

• Possible 5 percent reduction in income tax for salaried workers

• Removal of super tax on corporations and wealthy individuals

• Lower property income taxes

• Ending the 1 percent advance tax on exports

Officials said these measures may be included in the upcoming federal budget if the IMF agrees.

The government added that economic decisions will depend on IMF discussions and global conditions linked to Middle East tensions.