IMF notes Pakistan's progress in restoring economic stability

Fund warns structural challenges remain formidable with insufficient spending on health, education, infrastructure

The International Monetary Fund (IMF) acknowledged Pakistan’s progress in restoring economic stability but highlighted the country’s ongoing vulnerabilities and structural challenges. 

In a statement following the approval of a $7-billion, 37-month Extended Fund Facility (EFF) for Pakistan issued on Thursday, the IMF noted, "A difficult business environment, weak governance, and an outsized role of the state hinder investment, which remains very low compared to peers, while the tax base remains too narrow to ensure tax fairness, fiscal sustainability, and meet Pakistan’s large social and development spending needs.”

The IMF’s Executive Board approved the EFF after concluding its 2024 Article IV consultation, allowing for an immediate disbursement of $1 billion. The lender acknowledged Pakistan's steps to restore stability under the 2023-24 Stand-by Arrangement (SBA), with rebounding growth at 2.4% in FY24, falling inflation, and improved foreign exchange conditions.

However, the IMF warned that “Pakistan’s vulnerabilities and structural challenges remain formidable,” pointing to insufficient spending on health, education, and infrastructure. 

The IMF emphasised that without significant reforms, Pakistan risks falling behind its peers. Key priorities under the EFF include rebuilding policy credibility, broadening the tax base, strengthening competition, and improving SOEs and the energy sector. The program also focuses on building climate resilience.