International Monetary Fund has urged Pakistan to maintain strong macroeconomic policies and accelerate reforms to withstand economic shocks arising from the ongoing conflict in the Middle East.
The remarks were made by Nigel Clarke, Deputy Managing Director and Acting Chair of the IMF, following the Executive Board’s completion of the third review of Pakistan’s economic reform program under the Extended Fund Facility (EFF) and the second review of the Resilience and Sustainability Facility (RSF).
IMF approves over $1.3 billion for Pakistan
The IMF’s decision allows Pakistan to immediately access approximately $1.1 billion under the EFF arrangement and about $220 million under the RSF arrangement.
With the latest approval, total disbursements under the two programs have reached nearly $4.8 billion.
Pakistan’s 37-month EFF arrangement, approved in September 2024, aims to strengthen economic resilience and support sustainable growth through fiscal discipline, tax reforms, reserve accumulation and structural reforms.
Meanwhile, the 28-month RSF arrangement supports Pakistan’s efforts to improve climate resilience and reduce vulnerabilities linked to natural disasters.
IMF warns about uncertain global environment
Nigel Clarke noted that the external environment had become increasingly uncertain following the outbreak of war in the Middle East.
“Pakistan needs to maintain strong macroeconomic policies while accelerating reform efforts, which are critical to managing further shocks and fostering higher sustainable medium-term growth,” he said.
The IMF acknowledged that Pakistan’s policy implementation under the EFF has delivered “significant progress” in stabilizing the economy and rebuilding investor confidence despite global challenges.
Pakistan records economic stabilization progress
According to the IMF, Pakistan’s economy has shown signs of recovery during FY2026.
GDP growth accelerated during the first nine months of the fiscal year, inflation remained relatively contained, and the current account stayed broadly balanced.
The IMF said Pakistan is expected to achieve a primary fiscal surplus of 1.6% of GDP during FY2026, in line with agreed targets.
Foreign exchange reserves also improved significantly, rising to $16 billion by the end of December 2025 compared to $14.5 billion at the end of June 2025.
The IMF projected reserves would continue to strengthen over the coming year and medium term.
IMF stresses tax reforms and fiscal discipline
The IMF emphasized the importance of continued fiscal consolidation to improve Pakistan’s economic resilience.
The lender urged authorities to broaden the tax base, improve tax compliance and strengthen public financial management to enhance revenue collection and spending efficiency.
According to the IMF, these measures would create fiscal space for increased social protection spending, public investment, health and education programs.
SBP urged to maintain tight monetary policy
The IMF also praised the proactive role of the State Bank of Pakistan in maintaining a tight monetary policy stance aimed at controlling inflation expectations.
The institution advised the central bank to continue monitoring inflationary pressures, wages and commodity price shocks resulting from volatile global conditions.
The IMF further stated that exchange rate flexibility should remain Pakistan’s primary economic shock absorber while efforts to deepen the foreign exchange market continue.
Energy reforms remain critical
The IMF warned that recent gains in Pakistan’s energy sector must be sustained through continued reforms and realistic pricing mechanisms.
The lender advised the government to keep fuel, electricity and gas prices aligned with actual costs while protecting vulnerable consumers through targeted subsidies.
It added that reducing inefficiencies and financial losses in the energy sector would improve Pakistan’s overall competitiveness.
Structural reforms and privatization emphasized
The IMF stressed the need for Pakistan to continue structural reforms to attract private investment and ensure long-term growth.
Key priorities highlighted included privatization of state-owned enterprises (SOEs), strengthening anti-corruption institutions and improving the business environment by removing unnecessary regulations and market distortions.
Climate resilience reforms highlighted
Under the RSF arrangement, Pakistan is also implementing reforms to strengthen climate resilience and disaster preparedness.
The IMF said these reforms include improving water resource management, strengthening coordination on disaster response, integrating climate risks into budgeting and improving climate-related financial disclosures by banks and corporations.
According to the IMF, reducing Pakistan’s vulnerability to climate shocks will help improve long-term fiscal and macroeconomic stability.