Post by : Rameen Ariff

Islamabad: The International Monetary Fund (IMF) has imposed 11 new conditions on Pakistan under its $7 billion bailout programme, intensifying oversight of the country’s economic management and reform efforts. The latest measures bring Pakistan’s total compliance requirements to 64 over the course of 18 months, according to the IMF’s staff-level report for the second review of the programme.

The new conditions were announced even as the IMF approved fresh disbursements of about $1.2 billion, including roughly $1 billion under the Extended Fund Facility (EFF) and $200 million under the Resilience and Sustainability Facility (RSF). The Fund warned that policy slippages, weak institutions, and structural vulnerabilities still posed significant risks to Pakistan’s economic stability. The approval also included a request for a waiver of non-observance of a performance criterion, highlighting ongoing gaps in compliance with programme commitments.

The IMF report noted that while Pakistan’s authorities had demonstrated “strong programme implementation,” the economy remained exposed to serious risks. Policy priorities must focus on maintaining macroeconomic stability, improving public finances, boosting competitiveness, and strengthening the social safety net. The Fund also emphasized the need to reform state-owned enterprises and enhance energy sector viability, areas that have repeatedly undermined Pakistan’s economic stabilization efforts.

Pakistan’s heavy debt burden and reliance on external financing remain a concern. The IMF report noted that total public debt exceeds $307 billion, with external debt accounting for over one-third. Obligations under IMF programmes form a significant portion of Pakistan’s multilateral liabilities. Despite fiscal improvements, including a primary surplus of 1.3 percent of GDP in FY25, inflation and household pressures remain acute, partly due to the impact of recent floods on food prices.

The IMF further highlighted that Pakistan’s economic recovery is vulnerable to shocks and policy reversals, particularly amid a challenging global environment. The recent floods underscored the urgent need for climate-related reforms to enhance resilience to natural disasters. While foreign exchange reserves have risen to $14.5 billion at the end of FY25, up from $9.4 billion a year earlier, the IMF stressed that reserves must be strengthened over the medium term through careful macroeconomic management.

Pakistan has turned to the IMF more than 20 times since the late 1980s, reflecting persistent balance-of-payments challenges, a narrow tax base, and weak governance. The repeated reliance on international bailouts without structural reforms continues to raise concerns about regional stability and economic growth. Pakistan’s 37-month EFF, approved in September 2024, and the 28-month RSF, approved in May 2025, aim to stabilize the economy and restore confidence, but the IMF’s latest review makes clear that sustained compliance and reform momentum are critical for long-term success.

The IMF’s latest warnings underline that despite the release of additional funds, Pakistan’s economic challenges are far from resolved, and continued international scrutiny will remain central to the programme’s future progress.

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