ME conflict to slow MENAP economies: IMF

The ongoing Middle East conflict is likely to create a significant economic slowdown and heightened risks across the MENAP region, IMF Resident Representative Dr Mahir Binici said at an outreach session at the Sustainable Development Policy Institute (SDPI).

The outbreak of war on February 28 has triggered a severe shock, disrupting energy markets, trade routes and financial conditions, particularly around the Strait of Hormuz, he said. For oil?importing economies like Pakistan, the conflict has compounded vulnerabilities through higher energy and food import costs, a potential decline in remittances from Gulf?based workers, and tighter financial conditions.

Binici appreciated that Pakistan's performance under the IMF's Extended Fund Facility (EFF) programme remains broadly on track, with a staff?level agreement on the third EFF review and the second Resilience and Sustainability Facility (RSF) review reached in March. Policy priorities include maintaining a prudent fiscal stance, ensuring a tight and data?driven monetary policy, and advancing structural reforms.

Over the medium term, he stressed the need to strengthen economic resilience through diversified trade routes, investment in critical infrastructure, enhanced regional cooperation, and reforms to promote private?sector?led inclusive growth.

SDPI Executive Director Dr Abid Qaiyum Suleri said Pakistan remains vulnerable to regional and global shocks due to limited preparedness, urging a shift from blanket subsidies to targeted social protection policies. He also called for energy sector reforms, including negotiations on capacity payments and greater reliance on renewables.