Despite global economic uncertainty, Pakistan must maintain continuity in prudent economic policies while accelerating reforms to achieve sustainable, medium-term, private-sector-led growth. This was stated in a press release issued after the meeting of the International Monetary Fund’s (IMF) Executive Board.
IMF Deputy Managing Director and Acting Chair Nigel Clarke, in his statement, said that under the EFF program, Pakistan has maintained macroeconomic stability despite several recent shocks by implementing reforms. According to him, real GDP growth has improved, inflation expectations have remained anchored, and fiscal and external imbalances continue to decline.
The statement noted that meeting the primary balance target for FY2026—while simultaneously addressing the immediate humanitarian needs of people affected by the recent devastating floods—is clear evidence of the government’s commitment to fiscal policy implementation. The IMF emphasized that increasing revenues through simplification of tax policy and widening the tax base is essential for fiscal sustainability. This will allow Pakistan to create more fiscal space for climate resilience, social protection, public investment, and human capital development.
According to the IMF, tight monetary policy has played a key role in reducing inflation, and it is essential to maintain this stance so that inflation remains within the State Bank’s target range. The Fund also emphasized deepening the foreign exchange market and allowing the exchange rate to remain flexible. The statement noted that strong supervision and regulatory enforcement in the financial sector are necessary to ensure that the banking system remains strong and well-capitalized. Additionally, the development of capital markets will increase financing options for both the private and public sectors.
Highlighting the need to accelerate energy-sector reforms, the IMF said that timely tariff adjustments have helped reduce the size of circular debt and contain additional accumulation. However, it stressed that sustainable reduction in generation and distribution costs of electricity and gas is essential. The publication of the diagnostic report on governance and anti-corruption was termed a positive step toward future reforms, while the Fund also stressed the need to improve the governance of state-owned enterprises (SOEs), enhance the business environment, and strengthen economic data.
The IMF said that Pakistan must focus on strengthening resilience to severe climate risks, especially in light of the recent floods. Under the RSF program, support is being provided for reforms related to disaster response, efficient water use, integrating climate considerations into public planning, and providing transparent information on climate risks.
The IMF projected Pakistan’s GDP growth at 3% in FY2025 and 3.2% in FY2026. Inflation is expected to decline from 23.4% in 2024 to 4.5% in 2025, before rising slightly to 6.3% in 2026. Unemployment is expected to fall from 8.3% to 7.5%.
According to the report, the overall budget deficit is expected to decline from 6.8% in 2024 to 5.4% in 2025, and further to 4% in 2026. The primary balance is expected to remain in a 2.5% surplus in 2026. Total public debt is projected at 70.6% of GDP in 2025 and 69.6% in 2026.
The IMF further stated that the current account could show a 0.5% surplus in 2025, before slipping into a small deficit in 2026. Foreign exchange reserves are expected to rise from $9.4 billion in 2024 to $14.5 billion in 2025, and $17.8 billion in 2026.
The statement added that the 28-month RSF program will help strengthen the institutional framework for dealing with challenges related to energy, water, climate risks, and natural disasters. The Executive Board has approved the second tranche of the EFF and the first tranche of the RSF, under which Pakistan will receive a total of approximately $1.2 billion.
