Pakistan meets all 7 QPCs, 5 of 8 ITs and SBs: IMF says policy efforts continue to bear fruit

ISLAMABAD: Pakistan has met all seven quantitative performance criteria (QPCs) and five of eight Indicative Targets (ITs) at end-December, while most continuous and other Structural Benchmarks (SBs) were met, set under the Extended Fund Facility (EFF) programme, says International Monetary Fund (IMF).

The IMF in its report “First review under EFF, request for modification of performance criteria and request for an arrangement under the Resilience and Sustainable Facility”, stated continued strong and timely implementation of EFF programme remains critical for Pakistan to safeguard recent hard-won economic stability and support sustainable growth. The 37-month EFF programme, approved on September 25, 2024, is on track, the Fund added.

The Fund stated that Pakistani authorities’ policy efforts have continued to bear fruit. Financial and external conditions have continued to improve, with a current account surplus in the first eight months of FY 2025 and reserves exceeding program projections. Inflation has recently declined to historical lows, although core inflation remains elevated at around 9 percent. The economic recovery is continuing, although growth in FY 2025 H1 was somewhat lower than anticipated.

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The FY 2025 primary surplus target is on track, but further fiscal reforms are necessary to strengthen revenue mobilisation and reduce debt, while creating space for social and development spending.

Monetary policy should remain tight and data dependent to ensure that inflation stays moderate, within the SBP’s target range. A more flexible exchange rate remains critical to absorb shocks and support the rebuilding of reserves.

Efforts to ensure energy sector cost recovery via timely tariff adjustments remain necessary supported by broader reforms to restore viability and reduce the sector’s high costs. Structural reforms to improve governance and the trade and investment environment need to deepen, to support stronger sustainable and inclusive growth.

The Fund further stated that the proposed arrangement under the Resilience and Sustainability Facility (RSF), with access set at 49.2 percent of quota (equivalent to SDR 1 billion), aims to reduce Pakistan’s balance of payments stability risks stemming from climate vulnerabilities. Reform Measures (RMs) aim to: (i) prioritize resilience to natural disasters and strengthen public investment processes at all levels of government; (ii) make the use of scarce water resources more efficient, including through better pricing; (iii) strengthen coordination of natural disaster response and financing between federal and provincial governments; (iv) improve the information architecture, for and disclosure of, climate-related risks by banks and corporates; and (v) support Pakistans efforts to meet its mitigation commitments and reduce related macro-critical risks.

Copyright Business Recorder, 2025