Key points
- IMF acknowledges Pakistan’s recent economic efforts
- Authorities’ policy efforts have continued to bear fruit: global lender
- Economic growth in FY25H1 lower than anticipated
ISLAMABAD: The International Monetary Fund (IMF) has warned Pakistan that the rising tensions with India, if sustained or deteriorate further, could heighten enterprise risks to the fiscal, external and reform goals of the programme.
In its latest report, the global lending body stated that reputational risks could also come from any perceived misuse of fund disbursements.
It, however, acknowledged Pakistan’s recent economic efforts and significant recovery.
Inflation at historic low
“The authorities’ policy efforts have continued to bear fruit. Financial and external conditions have continued to improve, with a current account surplus in the first eight months of FY25 and reserves exceeding program projections. Inflation has recently declined to historical lows, although core inflation remains elevated at around nine per cent. The economic recovery is continuing, although growth in FY25H1 was somewhat lower than anticipated,” the IMF said.
As mitigants, the Pakistani authorities have reiterated their strong commitment to the programme, which is designed to help restore economic stability, build resilience through stronger reserve buffers, and advance reforms to create stronger and inclusive growth.
Disbursements under EFF
Moreover, disbursements under the Extended Fund Facility (EFF) are dedicated to build reserves, and the programme’s ambitious fiscal and reserve goals (including floors on social spending) limit the space for non-priority spending and the use of reserves to finance imports, the Business Recorder reported.
Given the Resilience and Sustainable Facility (RSF)’s different purpose, its disbursements are available for fiscal financing, although there cannot be any disbursements outside of an EFF review and not before completion of the second review.
Careful Fund communication will be essential to underscore the Fund’s neutral role and avoid misperceptions about its lending activities, it added.
