Islamabad : A recent report by the International Monetary Fund (IMF) indicates that Pakistan has successfully met most of its economic targets, signaling improving stability in the country’s economy. The IMF considers the current inflationary pressures temporary, expecting them to ease in the near future.
According to the IMF, Pakistan’s foreign exchange reserves have increased significantly over the past year, rising from $9.4 billion to $14.5 billion. In addition, the IMF provided Pakistan with a financial assistance package totaling $1.2 billion during this period.
Looking forward, the IMF anticipates further growth in the country’s reserves and has recommended a series of measures to maintain economic stability. However, the report also warns that Pakistan’s balance of payments deficit is likely to widen in the coming years, potentially reaching $3.253 billion by 2029–30 after the current programme concludes. This could necessitate a new IMF arrangement.
The IMF stressed that contingency plans are essential to meet fiscal targets. If revenue shortfalls occur by December 2025, the government intends to implement measures such as increasing excise duties on fertilizers and pesticides, introducing taxes on high-value sugary products, broadening the sales tax base, and adjusting government expenditure accordingly.
In its efforts to stabilize the economy, the government has committed to deregulating the sugar industry, continuing tariff adjustments in the power sector, reducing sector losses, and cutting costs. Plans include rolling out point-of-sale systems for 40,000 large retailers over the next two years, and moving towards a harmonized sales tax system across all provinces.
For the fiscal year ahead, new development project spending will be capped at 10% of the Public Sector Development Programme (PSDP), with priority given to completing ongoing projects worth Rs2.5 trillion. Climate-related projects will receive more attention in the following year, and public procurement will transition to digital platforms, with compliance reports expected to be submitted to the president by March 2026.
Social protection initiatives will see an increase in Kafalat cash transfers, with quarterly payments rising to Rs14,500 per family starting January 2026, benefiting 10.2 million households. Biometric verification will remain a requirement, and an e-wallet system is expected to be introduced by June 2026.
Regarding energy reforms, tariff adjustments will be delayed from July to January 2026, and the government aims to eliminate circular debt inflows by FY2031. This includes settling Rs1.2 trillion owed to banks and clearing Rs128 billion in interest payments to independent power producers.
The IMF also reported positive trends, noting that income tax filings have risen from 5.2 million in FY2024 to an expected 7 million in FY2025. Additionally, foreign exchange reserves have improved from $9.4 billion to $14.5 billion, and Pakistan achieved a primary surplus of 1.3%, marking the first current account surplus in 14 years. Efforts to enhance revenue and reduce debt continue.
While inflation, primarily driven by food prices following the 2022 floods, is expected to ease to 7% this year, the IMF emphasized the importance of maintaining a tight monetary policy and flexible exchange rates to manage external shocks. The 2022 floods highlighted Pakistan’s vulnerability to climate change, affecting 7 million people, causing nearly 1,000 fatalities, and inflicting significant damage, underlining the need for improved disaster preparedness and water management systems.
The IMF also highlighted the importance of ongoing reforms in taxation, governance, state-owned enterprises, and energy sectors to ensure long-term economic growth. It called for efforts to strengthen the investment climate, enhance transparency in foreign exchange markets, and continue power sector reforms.
In conclusion, the IMF report states that while Pakistan’s recovery remains fragile, the country is progressing under the current programme. The implementation of sustained reforms and consistent policies will be crucial in reducing debt, boosting revenue, and fostering economic growth in the years to come.
