IMF warns Pakistan-India tensions could threaten reform, fiscal goals

ISLAMABAD: The rising tensions between Pakistan and India, if sustained or deteriorate further, could heighten enterprise risks to the fiscal, external and reform goals of the program, says the International Monetary fund (IMF).

The Fund in its latest report stated that reputational risks could also come from any perceived lack of even handed or if there was a perceived misuse of Fund disbursements.

As mitigants, the Pakistani authorities have reiterated their strong commitment to the program, which is designed to help restore economic stability, build resilience through stronger reserve buffers, and advance reforms to create stronger and inclusive growth.

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Moreover, disbursements under the Extended Fund Facility (EFF) are dedicated to build reserves, and the program’s ambitious fiscal and reserve goals (including floors on social spending) limit the space for non-priority spending and the use of reserves to finance imports.

Given the Resilience and Sustainable Facility (RSF)‘s different purpose, its disbursements are available for fiscal financing, although there cannot be any disbursements outside of an EFF review and not before completion of the second review. Careful Fund communication will be essential to underscore the Fund’s neutral role and avoid misperceptions about its lending activities, it added.

Copyright Business Recorder, 2025