Editorial
Pakistan and the International Monetary Fund have finally reached a staff-level agreement for the second review under the Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF), unlocking nearly $1.2 billion in financing. The deal, though delayed, calms weeks of market anxiety and reassures investors that Pakistan’s reform agenda remains on track.
The delay was mainly due to the IMF’s assessment of flood losses, which the Fund has now accepted without altering Pakistan’s key quantitative targets. Both sides were keen to conclude the agreement — Pakistan for liquidity support, and the IMF for continuity amid fragile global markets. Recent diplomatic warmth between Islamabad and Washington also helped sustain momentum.
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Yet, while the agreement brings stability, it does not promise transformation. The IMF has revised Pakistan’s growth outlook to 3.25–3.5%, just enough to meet external payments but too low to absorb millions entering the labor market. The government’s own downgraded forecast reflects the same concern: stabilization without expansion.
The Fund has acknowledged improved fiscal discipline and external performance, but flood-related vulnerabilities, inflation risks, and sluggish investment remain serious threats. It has urged higher spending on social protection, education, and health, largely through provincial budgets. Meanwhile, the energy sector remains Pakistan’s chronic fault line — the IMF’s insistence on cost recovery without governance reform has repeatedly failed. True efficiency demands privatization and competitive energy markets, not endless tariff adjustments.
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Monetary policy will stay tight for now, with possible easing later in the year as inflation moderates. But unless Pakistan advances governance reforms and restructures its state-owned enterprises, economic recovery will remain fragile. The IMF deal buys time — not transformation. Lasting progress will come only when Islamabad matches fiscal prudence with institutional reform and inclusive growth.
