The International Monetary Fund (IMF) has expressed sharp concerns about Pakistan’s economic stewardship and reform progress even as it disbursed roughly $1.2 billion from its ongoing assistance programmes. In the latest assessment, released after the IMF Executive Board completed a second review of Pakistan’s Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF), the Fund approved an immediate release of about $1 billion from the EFF and another $200 million from the RSF. However, this approval was accompanied by a “request for a waiver of nonobservance of a performance criterion,” underscoring persistent gaps in meeting programme commitments.
The Fund acknowledged that Pakistan’s authorities have demonstrated “strong program implementation,” yet highlighted that the economy remains vulnerable to significant risks, calling for continued discipline to prevent a retreat. It outlined that “policy priorities remain centered on maintaining macroeconomic stability and advancing reforms to strengthen public finances, enhance competition, raise productivity and competitiveness, bolster the social safety net and human capital, reform SOEs, and improve public service provision and energy sector viability,” the IMF said. The emphasis on state‑owned enterprises and the energy sector echoes long‑standing IMF worries about ongoing losses, inefficiencies, and fiscal drains that routinely undermine Pakistan’s stabilization efforts.
In its staff report, the IMF emphasized the necessity of detailed, ongoing reporting by Pakistani officials—including the State Bank of Pakistan, the Ministry of Finance, and other agencies—warning that “any non‑observance of continuous PCs” must be promptly notified. It also drew attention to Pakistan’s heavy debt load and dependence on external financing, noting that public debt exceeded $307 billion, with external debt forming over one‑third of the total, and IMF obligations constituting a large part of multilateral liabilities.
While the Fund praised progress, it cautioned that gains are fragile. It reported that fiscal performance has been robust, with a primary surplus of 1.3 percent of GDP achieved in FY25, matching targets, but noted that inflation has risen, “reflecting the impact of the floods on food prices,” and that household pressures remain acute. The IMF argued that Pakistan’s recovery is susceptible to shocks and policy reversals, especially given the tough global backdrop. “Continued strong policy implementation has helped Pakistan weather several shocks this year,” the IMF said in its executive summary, but warned that “the recent floods moderately dampen the outlook for FY26.”
The Fund also stressed the importance of climate‑resilience reforms, noting that recurring natural disasters pose long‑term economic risks. “The recent floods highlight the urgency of moving swiftly on climate‑related reforms to build resilience to the frequent natural disasters that Pakistan faces,” the IMF said, acknowledging that progress in this area is being supported by the RSF. Despite rebuilding foreign exchange reserves to $14.5 billion by the end of FY25 (up from $9.4 billion the previous year), the IMF stated that reserves still need bolstering over the medium term, with careful macroeconomic management.
For India and the broader region, the IMF’s assessment reinforces concerns about Pakistan’s repeated reliance on external bailouts, weak reform implementation, and structural economic fragilities—factors that can impact regional stability and growth. Pakistan’s 37‑month EFF, approved in September 2024, and its 28‑month RSF, approved in May 2025, together aim to stabilize the economy, restore confidence, and support reforms. Yet the IMF’s latest review makes it clear that sustained compliance and reform momentum remain essential for the programme’s success. Given Pakistan’s record of more than 20 IMF engagements since the late 1980s—driven by balance‑of‑payments gaps, a narrow tax base, and governance weaknesses—India has consistently argued in international forums that repeated bailouts without substantial structural change have failed to deliver durable stability. The IMF’s recent cautions underline that even with additional funding, Pakistan’s economic challenges remain far from resolved, and ongoing scrutiny will continue to shape future reviews.
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