ISLAMABAD – Pakistan appears to be stepping back from the brink of a financial crisis, with the International Monetary Fund (IMF) reporting that the immediate risk of a debt default has eased, though the country’s path to full economic stability remains fragile and uncertain.
- In its latest review, the IMF approved a fresh disbursement of US $1.2 billion to Islamabad, citing improvements in key economic indicators. Growth is projected to rise from 2.6 percent in FY2024 to 3.2 percent by FY2026, providing a modest but positive momentum for the economy. Consumer price inflation, which had soared to 23.4 percent in FY2024, has now fallen to around 4.5 percent, offering relief to households struggling under rising living costs.
- Fiscal indicators are also showing signs of stabilization. Government revenue is on the rise, the budget deficit is expected to narrow to 4.0 percent of GDP, and a primary surplus of 2.5 percent of GDP is anticipated — all key targets set by the IMF to ensure financial discipline. Foreign reserves are expected to improve, strengthening Pakistan’s ability to manage imports and external obligations.
- Despite these encouraging signs, the IMF cautions that Pakistan’s economic challenges remain significant. Government debt is projected to stay high at 72–73 percent of GDP, with total government‑guaranteed debt near 76 percent. Unemployment is likely to fall only slightly, from 8.3 percent to 7.5 percent by FY2026, and foreign investment remains subdued. Domestic borrowing costs continue to limit private-sector growth, and structural reforms are urgently needed to sustain momentum.
- The IMF describes the current situation as stabilization rather than recovery. While the easing of default risk brings temporary relief, Pakistan must continue with fiscal reforms, improve investor confidence, generate employment, and manage debt prudently to avoid sliding back into financial uncertainty.
As the country navigates these economic challenges, policymakers face the delicate task of maintaining growth while implementing reforms in a way that does not overwhelm citizens already burdened by inflation and limited job opportunities. The coming months will be crucial in determining whether Pakistan can build on this cautious optimism or face renewed financial strain.
This story has been reported by PakTribune. All rights reserved.