The International Monetary Fund has urged Pakistan to increase climate change weighting to at least 30% in all PSDP projects. It also called for public disclosure of project selection scores. The move aims to improve infrastructure planning and align spending with the National Climate Change Policy.
In its second review under the Extended Fund Facility, the IMF recommended a comprehensive system to track climate-related spending across federal and provincial governments. Officials emphasized regular monitoring of execution against planned climate allocations to ensure transparency and effectiveness. The IMF also plans consultations with the World Bank on climate finance elements of project selection.
Read more: IMF blocks new zones as Pakistan accepts 23 conditions
The Fund suggested revising the PSDP call circular so all major projects costing over Rs7.5 billion undergo climate vulnerability, adaptation, and mitigation screening. It further recommended publishing consolidated reports summarizing screening results for all such projects. This approach aims to improve fiscal sustainability and reduce import demand for climate-related infrastructure.
Additionally, the IMF advised expanding the federal climate budget-tagging framework to include grants and subsidies, extending it to provincial spending. It called for annual climate budget statements and quarterly execution reports to explain deviations from targets. The Ministry of Planning should publish project selection criteria, including a scorecard and methodology, and impose an annual cap on new PSDP projects.
Read more: Pakistan receives $1.2 billion from IMF, confirms State Bank
Supplemental support will come from the Asian Development Bank, with technical assistance from the World Bank. The European Commission and UK Foreign Office will support public financial management reforms and integrate green budgeting at the provincial level, ensuring Pakistan’s infrastructure investments remain climate-conscious and sustainable.