The International Monetary Fund (IMF) has said Pakistan’s economic recovery remains on track due to steady policy implementation, while warning that the ongoing conflict in the Middle East could create fresh risks for growth, inflation and external stability.
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In its latest assessment released after completing the third review of Pakistan’s programme under the Extended Fund Facility (EFF) and the second review under the Resilience and Sustainability Facility (RSF), the IMF praised the government’s reform efforts and economic management.
The Fund said Pakistan had made “significant progress” under both programmes, noting that strong fiscal and monetary policies had helped stabilise the economy and rebuild investor confidence despite a challenging global environment.
According to the IMF, Pakistan’s fiscal performance has remained strong, with a primary surplus of 1.6 percent of GDP expected in fiscal year 2026, in line with agreed targets.
The lender also highlighted improvements in macroeconomic indicators during the first half of FY26, including stronger GDP growth, contained inflation and a broadly balanced current account.
Foreign exchange reserves improved beyond earlier expectations, reaching approximately $16 billion by the end of December, compared with $14.5 billion in mid-year estimates, according to the report.
The review follows confirmation by the State Bank of Pakistan that it had received $1.32 billion after IMF approval, including $1.1 billion under the EFF and around $220 million through the RSF.
However, the IMF cautioned that the Middle East conflict has introduced new uncertainty into Pakistan’s outlook, particularly through higher global commodity prices and external financial pressures.
It warned that the conflict could place upward pressure on inflation while weighing on economic growth and the balance of payments, although the overall baseline impact is currently expected to remain manageable.
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The IMF urged Pakistan to maintain disciplined macroeconomic policies, continue fiscal consolidation and accelerate structural reforms, including state-owned enterprise restructuring, governance improvements and business climate reforms.
Deputy Managing Director Nigel Clarke said continued reform momentum would be essential for strengthening resilience, protecting fiscal sustainability and supporting inclusive long-term economic growth.