Asian News Makers
Latest Updates Pakistan

Pakistan Economy: IMF Warns of High Risk for Future

The International Monetary Fund (IMF) has sounded the alarm on Pakistan’s economic future, citing significant downside risks in its latest report. The warning comes ahead of discussions between the Pakistani government and the IMF regarding a new long-term economic programme.

The report, highlighted by Dawn, underscores concerns about the country’s stability and the formidable challenges it faces.

According to the IMF staff report, Pakistan faces exceptionally high downside risks, with lingering political uncertainty posing a significant threat to policy making.

Despite the government’s stated commitment to continue the Standby Arrangement (SBA) policies, the report suggests that political instability could impede effective decision-making, especially amidst the backdrop of soaring living costs and other political complexities.


Impending Challenges and Financial Pressures

The IMF report further warns that any policy slippages, coupled with reduced external financing, could jeopardize Pakistan’s progress towards achieving debt sustainability and exert pressure on the exchange rate.

External stability is also under threat from various factors such as surging commodity prices, disruptions in shipping, and tighter global financial conditions. These challenges could exacerbate Pakistan’s financial woes, as highlighted in the Dawn report.

Emphasizing the urgency of the situation, the IMF stresses the critical need for timely disbursements of post-programme external financing. Although Pakistan recently concluded a short-term $3 billion programme, Prime Minister Shehbaz Sharif has underscored the necessity for a fresh, longer-term arrangement to address the country’s persistent economic issues.

Last summer, Pakistan narrowly avoided default, and since then, the economy has shown signs of stabilization, with inflation dropping from a staggering 38 per cent in May to approximately 17 per cent in April.

However, significant hurdles remain, including a substantial fiscal shortfall and stagnant growth. Projections suggest growth will hover around 2 percent this year, marking a modest improvement from the negative growth experienced last year.


Seeking IMF Assistance and Additional Financing

To confront these challenges head-on, Pakistan is expected to seek a financial package of at least $6 billion from the IMF and request additional financing from the Fund under the Resilience and Sustainability Trust, as reported by Dawn.

The country aims to leverage these resources to bolster its economic resilience and sustainability in the face of ongoing economic turmoil and global uncertainties.

The IMF’s stark warning underscores the precarious nature of Pakistan’s economic landscape, with looming uncertainties and formidable challenges threatening the country’s stability and financial well-being.

As Pakistan navigates through these turbulent times, swift and decisive actions, coupled with robust international support, will be imperative to steer the nation towards a path of sustainable economic recovery and growth.

Related posts