Washington D.C. / Islamabad – The International Monetary Fund (IMF) has offered a cautious assessment of Pakistan’s economic outlook, stating that the immediate risk of economic free fall has eased, but the country remains committed to a challenging and narrow stabilisation path. This assessment follows the IMF Executive Board’s recent approval of another tranche of funding, amounting to approximately $1.2 billion for Pakistan.
The disbursement, which includes funds under the Extended Fund Facility (EFF) and the climate-focused Resilience and Sustainability Facility (RSF), signals a vote of confidence in the government’s recent macroeconomic management and reform efforts. The IMF noted that the implementation of reforms has helped maintain financial stability and improved external conditions despite recent shocks, including severe flooding.
📉 Default Risk Eases, But Challenges Remain
The immediate relief from default fears is a direct result of the government’s policy adjustments, including adherence to fiscal targets, a tighter monetary policy, and structural reforms undertaken under the IMF program.
- Disbursement Approved: The approval allows for the fresh release of funds, providing crucial external financing support for the cash-strapped nation.
- Macroeconomic Stability: IMF officials acknowledged that Pakistan’s policy implementation has been consistent with program goals, leading to a visible stabilization of the economy.
- Fiscal Improvement: The country achieved a primary surplus in line with program expectations, and gross foreign exchange reserves have been on an upward trend.
- Inflation Outlook: Consumer price inflation is projected to have fallen sharply after averaging high rates, reflecting tight monetary policy and compressed demand. However, the projection for a rebound suggests price stability remains fragile.
🐌 Weak Growth and Heavy Debt: The Narrow Road Ahead
Despite averting the immediate crisis, the IMF projections highlight that Pakistan’s economic recovery remains fragile and insufficient to provide broad-based relief.
- Weak Growth Projection: Economic growth is projected to inch up from 2.6% in FY2024 to 3.2% by FY2026. This pace is barely enough to keep up with the country’s high population growth rate, pointing to economic containment rather than robust recovery.
- Limited Household Relief: The current stabilisation path offers limited relief for average households, who continue to face pressures from heavy debt and slow job growth.
- Call for Sustained Reforms: The Fund emphasized that a sustained, private sector-led growth trajectory requires a continuation of structural reforms, particularly in:
- Strengthening the tax base and simplifying tax policy.
- Reforming the energy sector to safeguard its viability and improve competitiveness.
- Accelerating the State-Owned Enterprises (SOE) reform and privatisation agenda.
- Improving governance and addressing corruption vulnerabilities.
The IMF’s message is clear: while the country has stepped back from the precipice, the real test lies in maintaining discipline and accelerating difficult structural reforms to ensure the current stability translates into sustainable, inclusive long-term growth.
nddailyupdates.news.blog 