{"id":37,"date":"2026-05-18T17:43:27","date_gmt":"2026-05-18T17:43:27","guid":{"rendered":"https:\/\/goodforfree.com\/index.php\/2026\/05\/18\/pakistans-economy-stabilising-but-middle-east-war-threatens-progress-imf-warns\/"},"modified":"2026-05-18T17:43:27","modified_gmt":"2026-05-18T17:43:27","slug":"pakistans-economy-stabilising-but-middle-east-war-threatens-progress-imf-warns","status":"publish","type":"post","link":"https:\/\/www.goodforfree.com\/index.php\/2026\/05\/18\/pakistans-economy-stabilising-but-middle-east-war-threatens-progress-imf-warns\/","title":{"rendered":"Pakistan’s Economy Stabilising But Middle East War Threatens Progress, IMF Warns"},"content":{"rendered":"
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Pakistan’s economic recovery remains on track despite mounting global pressures, but the escalating conflict in the Middle East now poses a serious threat to the country’s hard-won stability, the International Monetary Fund has warned.<\/p>\n

The global lender released its latest assessment on Friday following completion of Pakistan’s third programme review, acknowledging that disciplined policy execution has helped the country preserve economic stability and improve financing conditions. Yet the Fund made clear that the fallout from the regional war could test Pakistan’s outlook in the months ahead.<\/p>\n

The IMF approved disbursement of $1.32 billion to Pakistan earlier this month, with the State Bank confirming receipt of the funds on May 12. The package includes $1.1 billion under the Extended Fund Facility and roughly $220 million through the Resilience and Sustainability Facility, bringing total disbursements under both programmes to approximately $4.8 billion.<\/p>\n

According to the Fund, Pakistan achieved a primary fiscal surplus of 1.6 percent of GDP in the current fiscal year, meeting programme targets. Growth momentum picked up in the first half of the year, inflation stayed relatively contained, and the current account remained broadly balanced. Foreign exchange reserves climbed to around $16 billion by December’s end, surpassing earlier projections and up from $14.5 billion at mid-year.<\/p>\n

Yet the IMF’s tone turned cautious when addressing external risks. The Middle East conflict has injected fresh uncertainty into Pakistan’s economic trajectory, the Fund noted, warning that the war could push inflation higher and weigh on both growth and the balance of payments. While the baseline scenario suggests the overall impact may be contained, the Fund emphasised that downside risks remain elevated.<\/p>\n

“Amid a more challenging and highly uncertain external environment since the onset of the war in the Middle East, Pakistan needs to maintain strong macroeconomic policies while accelerating reform efforts,” the IMF stated, stressing that such measures are critical for managing further shocks and fostering sustainable medium-term growth.<\/p>\n

The Fund called on Pakistan to sustain fiscal discipline, particularly by maintaining primary surpluses and broadening the tax base. It urged improvements in public financial management and spending efficiency to underpin long-term stability. The State Bank received praise for its tight monetary stance aimed at anchoring inflation expectations, though the IMF emphasised continued vigilance against potential price pressures.<\/p>\n

On external accounts, the Fund reiterated that exchange rate flexibility should serve as the primary buffer against shocks, alongside efforts to deepen foreign exchange markets and rebuild reserves. Structural reforms\u2014including state-owned enterprise overhauls, governance improvements, and measures to enhance the business environment\u2014were highlighted as essential for sustained growth.<\/p>\n

Climate resilience also featured prominently in the review, with the IMF noting progress in strengthening disaster response systems, improving water resource management, and integrating climate risks into financial and budgetary planning.<\/p>\n

Nigel Clarke, Deputy Managing Director and Acting Chair at the IMF, said Pakistan’s programme implementation had remained strong, helping stabilise the economy despite a highly uncertain external environment. He added that maintaining reform momentum would be crucial to safeguarding fiscal sustainability, strengthening financial stability, and supporting inclusive long-term growth.<\/p>\n

Deputy Prime Minister and Foreign Minister Ishaq Dar described the IMF’s approval as a sign of confidence in the government’s policies and reforms, telling media last week that the tranche reflects the Fund’s trust in the administration’s measures.<\/p>\n

Pakistan’s 37-month Extended Fund Facility arrangement, approved in September 2024, aims to build resilience and enable sustainable growth through sound policy implementation, reserve rebuilding, tax base expansion, state-owned enterprise reform, and intensified anti-corruption efforts. The 28-month Resilience and Sustainability Facility, approved in May 2025, supports efforts to reduce vulnerability to natural disasters and strengthen climate resilience.<\/p>\n

While the IMF’s assessment offers reassurance that Pakistan’s reform programme is delivering results, the Fund’s warning about the Middle East conflict underscores the fragility of the recovery and the need for continued vigilance as regional tensions threaten to spill over into Pakistan’s economic sphere.<\/p>\n","protected":false},"excerpt":{"rendered":"

Pakistan’s economic recovery remains on track despite mounting global pressures, but the escalating conflict in the Middle East now poses a serious threat to the country’s hard-won stability, the International Monetary Fund has warned. The<\/p>\n","protected":false},"author":1,"featured_media":36,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[3,9,4],"class_list":["post-37","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-world","tag-ai-consensus","tag-geo-news","tag-journalist-ai"],"featured_image_url":"https:\/\/goodforfree.com\/wp-content\/uploads\/2026\/05\/pakistan-s-economy-stabilising-but-middle-east-war-threatens-progress-imf-warns.png","read_time":"4 min read","source_name":"Goodforfree","_links":{"self":[{"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/posts\/37","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/comments?post=37"}],"version-history":[{"count":0,"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/posts\/37\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/media\/36"}],"wp:attachment":[{"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/media?parent=37"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/categories?post=37"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.goodforfree.com\/index.php\/wp-json\/wp\/v2\/tags?post=37"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}