With its GDP rising at lower than 3% since 2023, document inflation and pure disasters, Pakistan’s economic system has been reeling from shocks on a number of entrance that finally led it to hunt one more bail out from the Worldwide Financial Fund. Its exterior debt obligations, analysts spotlight wouldn’t be financed with out the IMF bundle with its whole exterior debt at $131 billion by December 2024.
After contracting by 0.2% of their fiscal yr July 2022 to June 2023, Pakistan’s economic system was on a restoration monitor with GDP progress at 2.5% in FY24 and estimated at 2.7% in FY25 as per the World Financial institution. Its financial progress was seen to increase to three.1% in FY26, as per the World Financial institution’s estimate. Inflation, which had risen to a peak of practically 40% in mid 2023 in Pakistan, has declined to 0.7% by March 2025 and to 0.3% by April this yr.
“In Pakistan, the economic system continues to get better from a mixture of pure disasters, exterior pressures, and inflation. Inflation has slowed extra rapidly than anticipated, offering room for additional financial easing,” famous the World Financial institution’s South Asia Growth Report that was launched in April 2025.
“The settlement reached in September 2024 on an IMF-supported coverage program helped stabilize the trade fee and cut back the danger of debt default, as mirrored in rankings upgrades from a number of credit standing companies and a narrowing of borrowing spreads,” the report highlighted noting the essential position of the IMF bailout to Pakistan.
IMF Bailout
On Could 9, the Government Board of the IMF permitted accomplished the primary overview of Pakistan’s financial reform program supported by the Prolonged Fund Facility (EFF) Association that allowed for an instantaneous disbursement of round $1 billion to the nation. With this, the entire disbursements to Pakistan from the IMD underneath the association are actually at $2.1 billion. Moreover, the IMF Government Board permitted the authorities’ request for an association underneath the Resilience and Sustainability Facility (RSF), with entry of about US$1.4 billion (SDR 1 billion).
On the assembly, India raised issues over the efficacy of IMF applications in case of Pakistan given its poor monitor document and abstained from voting.
The 37-month EFF facility which was permitted by the IMF in September 2024, had begun to indicate some outcomes, as per the IMF press launch, that famous that Pakistan’s fiscal efficiency has been robust with major surplus of two% of GDP within the first half of FY25. The progress on disinflation and steadier home and exterior situations, have allowed the State Financial institution of Pakistan to chop the coverage fee by a complete of 1100 bps since June 2025, the IMF famous, including that gross reserves stood at $10.3 billion at end-April, up from $9.4 billion in August 2024, and are projected to achieve $13.9 billion by end-June 2025 and proceed to be rebuilt over the medium time period.
Analysts additionally anticipated a choose up in client demand and enterprise confidence.
Dangers proceed:
However the ongoing battle with India will certainly show to be a drag on Pakistan’s economic system with investor and enterprise confidence set to wane and an extra depreciation of presidency funds. A number of different dangers have continued and Pakistan would have a protracted option to go in reaching a full turnaround of its economic system.
Analysts be aware that governance continues with inside political stress is a key threat for Pakistan in addition to the influence of local weather change that has led to sever flooding in recent times whereas entry to recent water stays a problem for the nation.
Extra worryingly, its exterior debt obligations stay excessive with out ample international trade reserves.
Moodys’s Rankings in its credit score opinion on Pakistan in February this yr famous that Pakistan’s exterior vulnerability dangers stays excessive. “Though growing, international trade reserves stay nicely beneath what’s required to satisfy its exterior debt obligations over the following few years,” it mentioned. The federal government’s exterior principal debt repayments are about $22-23 billion annually over fiscal 2025-2027.
“The nation continues to be reliant on well timed financing from official companions to completely meet its exterior debt obligations, underscoring the significance of regular progress with its IMF EEF program to repeatedly unlock financing,” it famous.
This isn’t all. The nation has a poverty fee of 21.9%, that means that just about 1 / 4 of its inhabitants is unable to afford primary gadgets. Its per capita GDP fee was $1,566 in 2023-24. Its unemployment fee was 8.3% in FY24 and was projected at 8% in FY25 as per the IMF. As per the UN Human Growth Index, Pakistan was ranked 164 on a listing of 193 nations in 2023.
