PTBP Web Desk

Pakistan must continue its disciplined economic policies and accelerate structural reforms to achieve sustainable, private sector–driven growth amid global uncertainty. This key message was highlighted in a detailed IMF Pakistan Review released after the IMF Executive Board completed its latest assessments under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).

The review included a statement from Nigel Clarke, Deputy Managing Director and Acting Chair of the IMF, who praised Pakistan’s progress under the EFF programme. He noted that despite facing severe challenges — including global financial volatility and devastating floods — Pakistan has managed to preserve macroeconomic stability, maintain orderly markets, and keep inflation expectations anchored.

Clarke emphasised that Pakistan’s reform momentum has helped real GDP growth accelerate and allowed external and fiscal imbalances to gradually moderate. These improvements, he said, reflect the authorities’ commitment to responsible economic management and recovery-oriented macroeconomic frameworks.

In the statement, Clarke reiterated that Pakistan’s adherence to its FY 2026 primary balance target, even while providing urgent relief during the recent flood emergency, indicates a strong commitment to building fiscal credibility. He added that this approach has reassured international creditors and contributed to stabilising market expectations.

The IMF stressed that Pakistan must move forward with tax policy simplification and broadening of the tax base. These steps are necessary not only to meet fiscal targets but also to create space for essential spending in areas such as climate resilience, social protection, and public investment.

Additionally, the IMF underscored that raising revenue generation capacity is vital for long-term financial health. Improving compliance, addressing chronic leakages, and reducing exemptions will help ensure fiscal sustainability.

For users seeking insights on Pakistan’s taxation reforms, the Federal Board of Revenue (FBR) provides further policy updates on its official website.

According to the IMF, Pakistan’s tight monetary policy has been pivotal in reducing inflation and keeping inflation expectations under control. Clarke added that the State Bank of Pakistan (SBP) must maintain this stance to ensure inflation remains within the target range.

The IMF also urged Pakistan to improve central bank communication to enhance monetary policy effectiveness. Furthermore, the SBP was advised to deepen the interbank foreign exchange market and allow the exchange rate to absorb external shocks. Flexibility in the exchange rate, the IMF stated, remains essential for maintaining adequate foreign exchange reserves.

More details on monetary policy directions can be found through the State Bank of Pakistan’s official updates.

The IMF highlighted that energy sector reforms must continue aggressively to ensure the viability of Pakistan’s power and gas sectors. While the timely implementation of power tariff adjustments has helped reduce circular debt flow, deeper structural issues remain unresolved.

The Fund recommended reducing inefficiencies across electricity generation and distribution, tackling technical and non-technical losses, and lowering production costs. Addressing these issues is critical for restoring competitiveness and improving the investment climate.

Clarke welcomed the publication of Pakistan’s Governance and Corruption Diagnostic Report, a step he said will help accelerate governance reforms. He also encouraged the authorities to press ahead with reforms in state-owned enterprise (SOE) governance, privatization, economic data transparency, and improvements in the business environment.

He added that unlocking private sector investment requires predictable policies, transparent regulatory systems, and reduced bureaucratic hurdles.

The IMF noted that the recent floods once again exposed Pakistan’s vulnerability to extreme weather events. The RSF programme aims to help Pakistan strengthen natural disaster response planning, expand climate-related financial risk assessments, and improve the use of scarce water resources.

Enhanced water pricing, better disaster coordination between federal and provincial governments, and integrating climate considerations into public sector budgeting are among the key RSF priorities.

The IMF provided updated forecasts on Pakistan’s economic outlook:

• GDP Growth: 3% in FY 2025, rising slightly to 3.2% in FY 2026.
• Unemployment: Declining from 8.3% to 7.5% by 2026.
• Inflation: Easing from 23.4% in 2024 to 4.5% in 2025, rising modestly to 6.3% in 2026.
• Budget Deficit: Expected to narrow from –6.8% of GDP in 2024 to –5.4% in 2025, reaching –4% by 2026.
• General Government Debt: Estimated at 70.6% of GDP in 2025, easing to 69.6% in 2026.
• Foreign Reserves: Expected to rise from USD 9.4 billion in 2024 to USD 14.5 billion in 2025 and USD 17.8 billion in 2026.
• Current Account: Forecast to show a 0.5% surplus in 2025 before shifting to a modest deficit in 2026.

Pakistan’s export sector continues to rely heavily on textiles, generating USD 17.3 billion in 2024–25, with major markets in the European Union, United States, and UAE.