IMF issues updated assessment of Pakistan's economic outlook

The International Monetary Fund (IMF) has released its latest country report on Pakistan following the completion of the second review, offering an updated assessment of the nation’s economic outlook and the reforms still required to ensure stability.

The report notes that Pakistan recorded a 1.3 percent primary surplus in FY2025, while foreign exchange reserves rose to $14.5 billion. It says that inflationary pressures stemming from recent floods are likely temporary but warns that maintaining consistent policy discipline remains crucial.

A central theme of the IMF’s assessment is the urgency of broadening the tax base and simplifying the tax structure. The Fund also pointed to gaps in economic data, statistical reporting, and overall governance, stressing that these issues must now be addressed without delay.

The IMF reiterated the need for substantial reforms in public financial management, state-owned enterprises (SOEs), and the energy sector. It said timely power tariff adjustments are necessary to contain Pakistan’s growing circular debt, which continues to weigh heavily on economic performance.

Strengthening the energy sector, the report said, is vital to improving Pakistan’s competitiveness. It also emphasized that a tight monetary policy remains essential for keeping inflation within the targeted range.

The United Nations likewise advised the State Bank of Pakistan to enhance transparency and flexibility in the foreign exchange market to support economic stability.

Citing the economic and human impact of the recent floods, the IMF highlighted the pressing need for climate resilience, better water management, and stronger disaster preparedness.

The report concludes that Pakistan’s long-term growth trajectory must be driven by the private sector, calling it the most sustainable path for durable economic development.