May 16, 2025 (MLN): This week Pakistan received a $ 1 billion tranche from the International Monetary Fund (IMF), as confirmed by the State Bank of Pakistan (SBP). Normally, such inflow are part of routine financial obligations, which is a calm kink on the background of economic management. But this time the context made everything but routine.
The country had just emerged from the global spotlights, not because of its economy, but for a short but intense military escalation.
In the midst of this, India, the traditional rival, took the unusual step to encourage the IMF to reconsider his financial support to Pakistan. And yet the IMF has released the money.
This development bore a subtle but powerful message that Pakistan, even in the midst of elevated geopolitical tensions, continues to inspire confidence in both the economic direction and the diplomatic approach.
It showed that leading institutions and the global community not only trust our economic policy, but also in our foreign policy position. In other words, both tax and foreign policy is taken seriously on the world stage.
“Pakistan has made important progress in repairing the macro -economic stability despite a challenging environment,” said Nigel Clarke, deputy director and chairman of IMF Board.
On May 9, 2025, when Pakistan made the headlines about the war zone in the midst of escalating conflict, the IMF board completed the first assessment under the Fund Fame Facility (EFF) scheme, allowing the authorities to draw the equivalent of approximately $ 1 billion (SDR 760 million).
In addition, the IMF -executive council also approved the authorities’s request for a scheme under the Resilience and Sustainability Facility (RSF), with access of around $ 1.4 billion (SDR 1BN).
The IMF is of the opinion that, since the 37-months Eff of Pakistan was approved on 25 September 2024, the economy continued to recover, with inflation highly lower and external buffers considerably stronger.
However, risks to the prospects remain increased, in particular the uncertainty of global economic policy, rising geopolitical tensions and persistent domestic vulnerabilities.
Against this background, the authorities must maintain a solid macro-economic policy and speed up reforms to protect macro-economic profits and to substantiate stronger and sustainable growth through the private sector through the medium term.
Driven by tax consolidation, inflation control and external stability, the fund is expected to be gradually improved in the coming years, according to the latest IMF projections for FY2024 – FY2026.
The IMF expected that real GDP growth would increase from 2.5% in FY2024 to 3.6% in FY2026, which indicates cautious optimism that deeper structural reforms requires resilience in the long term.
A sharp fall in inflation is projected, whereby consumer prices fall from an average of 23.4% in FY2024 to 5.1% in FY2025, which allows this decrease to tight monetary policy, controlled government spending and inspections to stabilize currency clamps.
On the tax front, the budget deficit of the country will shrink from -6.8% of GDP in FY2024 to -5.1% in FY2026, powered by expected tax reforms and sales measures. The total government debt, excluding IMF obligations, will peak in FY2025 with 71.2% before it falls to 69.2% in FY2026, mainly as a result of the progress of debt management.
The fund also underlined the importance of maintaining tax discipline, which states that the successful implementation of tax policy and efficiency in government spending will be crucial in maintaining a stable financial outlook.
A significant improvement in currency reserves is expected because it has increased from $ 9.39 billion in FY2024 to $ 17.68 billion in FY2026.
The shortage in the current account is expected to remain manageable at -0.1% of GDP in FY2025. However, the prospects of the foreign direct investments (FDI) remain modest at 0.5% -0.6% of GDP.
Despite improving the indicators, the IMF has warned about risks linked to global economic shocks, domestic political stability and inefficiencies in the energy sector.
That is why effective governance and persistent structural reforms will be crucial in the realization of projected tax and economic improvements.
Recently, a Barron report has brought the headlines in the news in which the experts claim that “Pakistan is a good story, so good that it is no longer risky enough for distressing market investors.
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Posted on: 2025-05-16T22: 01: 35+05: 00
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