WASHINGTON DC: The International Monetary Fund completed Pakistan’s second review under the Extended Fund Facility and the first review under the Resilience and Sustainability Facility.
The Board approved immediate disbursements of US$1 billion under the EFF and US$200 million under the RSF, boosting Pakistan’s total receipts under both programs to US$3.3 billion.
Despite severe floods, Pakistan maintained macroeconomic stability and delivered consistent policy implementation. These efforts improved external conditions, strengthened market confidence, and supported ongoing structural reforms.
The IMF stressed that Pakistan must continue reforms that strengthen public finances, enhance competition, support social protection, and improve the energy sector’s viability. The Fund also warned that climate shocks demand faster action on resilience measures.
EFF Review Highlights Solid Progress
Pakistan’s 37-month EFF, approved in September 2024, aims to reinforce stability and support sustainable growth. The program focuses on rebuilding reserves, widening the tax base, and advancing structural reforms.
Authorities posted a primary surplus of 1.3% of GDP in FY25, meeting program goals. Inflation climbed due to flood-related food supply disruptions, but forecasts suggest this rise will ease. Gross reserves reached US$14.5 billion, up sharply from US$9.4 billion a year earlier.
The IMF expects reserves to build further in FY26 as Pakistan continues prudent macroeconomic management.
RSF Targets Climate Resilience and Disaster Preparedness
The 28-month RSF, approved in May 2025, supports Pakistan’s efforts to reduce climate vulnerabilities. The Fund highlighted urgent reforms, noting that recent floods exposed weaknesses in disaster readiness.
Pakistan’s RSF program prioritizes:
• Strengthening public investment systems for climate resilience
• Improving water efficiency through better pricing
• Enhancing federal-provincial disaster coordination
• Expanding climate-risk disclosures for banks and corporates
• Supporting mitigation goals to lower climate-related macro risks
These steps aim to protect Pakistan’s economy from escalating climate shocks.
IMF Calls for Persistent Reforms and Policy Discipline
Deputy Managing Director Nigel Clarke praised Pakistan’s reform momentum but urged continued discipline. He emphasized that growth improved, inflation expectations remained anchored, and external imbalances narrowed.
Clarke stressed that Pakistan must maintain a prudent fiscal stance, especially after the recent floods. He encouraged tax base expansion and simplification to create space for climate projects, social protection, and investment in human capital.
He also noted that tight monetary policy played a key role in easing inflation. Clarke advised Pakistan to maintain this stance, strengthen central bank communication, and allow exchange rate flexibility.
Energy, Governance, and SOE Reforms Remain Critical
The IMF warned that Pakistan’s energy sector still faces major inefficiencies. The authorities have reduced circular debt through tariff adjustments, yet deeper reforms remain essential. The Fund called for lower production costs, better distribution performance, and transparent gas-sector improvements.
Clarke welcomed Pakistan’s publication of its Governance and Corruption Diagnostic report. He urged stronger SOE governance, faster privatization, and better business-climate reforms to attract private investment.
The IMF also highlighted the need for stronger economic data and statistics to support policy decisions.
Climate Resilience Central to Long-Term Stability
Recent floods confirmed Pakistan’s extreme climate exposure. The IMF said stronger disaster planning, efficient water use, and climate-aligned budgeting will improve fiscal and macro stability. Better climate-risk information will help guide public and private financing decisions.
The RSF will support Pakistan as it implements these critical reforms and builds a more resilient economy.
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