https://arab.news/yu5va
- IMF mission says Pakistan’s recovery “remains on track” but warns recent floods threaten outlook
- Agreement awaits board approval, total disbursements under both facilities to reach $3.3 billion
KARACHI: The International Monetary Fund (IMF) said on Tuesday it had reached a staff-level agreement with Pakistan for the second review of its 37-month Extended Fund Facility (EFF) and the first review of a 28-month Resilience and Sustainability Facility (RSF), a step that could unlock about $1.2 billion once approved by the Fund’s Executive Board.
Pakistan secured a $7 billion bailout from the IMF in September 2024 after months of negotiations to stabilize its struggling economy, rebuild reserves and attract foreign investment. The program, divided between the EFF for macroeconomic reforms and the RSF for climate resilience, came after record inflation and devastating floods pushed millions into poverty.
Since then, the IMF says implementation has remained strong, with fiscal and monetary tightening restoring a measure of stability. The current-account balance recorded a surplus for the first time in 14 years, inflation has eased and external buffers have improved.
“Supported by the EFF, Pakistan’s economic program is entrenching macroeconomic stability and rebuilding market confidence,” said Iva Petrova, who led the IMF mission.
“The recovery remains on track, with the FY25 current account recording a surplus — the first in 14 years — the fiscal primary balance surpassing the program target, inflation remaining contained, external buffers strengthening, and financial conditions improving.”
The Fund said the Pakistani authorities had reaffirmed their commitment to the reform agenda, including sustaining a fiscal surplus of 1.6 percent of GDP in FY26, tightening monetary policy to keep inflation within the State Bank’s 5–7 percent target range, and continuing structural changes to restore the energy sector’s viability and prevent circular-debt accumulation.
However, the IMF warned that recent floods, which have affected about 7 million people and caused more than 1,000 deaths, had darkened Pakistan’s outlook, particularly for agriculture, and could drag FY26 growth down to around 3.3–3.5 percent.
“The floods underscore Pakistan’s high vulnerability to natural disasters and substantial climate-related risks, and the continuing need to build climate resilience,” Petrova said.
The IMF also noted progress on climate and governance reforms under the RSF, including steps to promote green mobility, improve disaster-risk financing and strengthen water-system resilience.